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Anchorage investor tries to torpedo state income tax

  • Author: Nathaniel Herz
  • Updated: December 2, 2017
  • Published January 27, 2017

One of the wealthiest Alaskans has launched a personal campaign against a statewide income tax, a policy that would likely take the most from the state's highest earners.

Investor Bob Gillam, who Forbes says is worth $320 million, is running radio and statewide newspaper ads pushing for the adoption of budget cuts and lower oil taxes instead of income taxes, which he claims are linked to "economic decline" in other states.

"Alaska does not need an income tax. We need oil in the pipeline," says the radio ad's narrator.

The ad also claims, without citing a source, that Alaska's budget "has more than doubled." State spending has actually been reduced to the same level as 10 years ago, according to a legislative analysis this month.

Bob Gillam in 2007. (Courtesy Bob Gillam)

Gillam, through an attorney at his Anchorage-based investment firm, McKinley Capital Management, declined to be interviewed and didn't respond to emailed questions.

Lawmakers are in the second week of their annual session in Juneau and still formulating plans to tackle the state's $3 billion deficit.

The Republicans who lead the state Senate have emphatically stated their opposition to new taxes. But Democrats and moderate Republicans who took control of the state House this year say they expect to propose some kind of broad-based tax measure, perhaps on income or sales.

Alaska, with neither a statewide sales tax nor income tax, has the lowest state-local tax burden in the country, according to the Tax Foundation, a Washington, D.C., nonprofit that studies national tax policies. Most of Alaska's revenue has historically come from oil taxes and royalties, though lawmakers are now filling a budget gap with quickly-dwindling savings because of declining oil production and a slump in prices.

The new newspaper and radio ads, which say they're paid for by "lifelong Alaskan Bob Gillam," are running across the state from Fairbanks to Ketchikan, including in Alaska Dispatch News.

Gillam has ventured into politics before, spending millions on a long-running political war against the proposed Pebble mining project near Bristol Bay — near where he has a recreational compound. And he reportedly helped fund attack ads against one state lawmaker, former Anchorage Democratic Rep. Eric Croft, over his support for an income tax more than a decade ago.

Gillam hasn't had to report how much money he's spending on his latest campaign. But his opposition to an income tax appears to be ideological rather than based on its potential effects on Gillam's own finances, according to Alaska Republican Party Chairman Tuckerman Babcock.

Babcock this month attended an Anchorage inaugural gala for President Donald Trump — one of Gillam's classmates at Wharton School — where Gillam delivered a speech that referenced his anti-tax campaign and in which he suggested he could shelter his income in a tax haven if Alaska implemented income taxes.

"He said, 'If anyone thinks this is all about me, it would be easy enough for me to move my income to a different state,' " Babcock said in a phone interview.

Instead, Gillam has focused his campaign on an income tax's potential effects on Alaska's broader economy. One of his newspaper ads includes a quote attributed to Winston Churchill that says a nation trying to "tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."

"Every state that introduced an income tax since 1960 experienced economic decline," the ad says, adding: "An income tax would be bad for Alaska."

What the ad doesn't mention are the alternatives available to reduce the deficit, which is so large that Alaska currently pulls 70 cents from savings to cover every dollar it spends.

None of the other budget reforms under consideration by lawmakers appears to be any better for the state's economy, said Mouhcine Guettabi, assistant professor at University of Alaska Anchorage's Institute of Social and Economic Research.

Guettabi, with two other ISER professors, published a paper last year analyzing the economic impacts of Alaska's budget options, which found that "anything the state does to reduce the deficit will cost the economy jobs and money."

The differences between policies — whether spending cuts, taxes or reductions to Alaskans' Permanent Fund dividend checks — are more about who is affected and where they live, Guettabi said. Income taxes would hit higher-income Alaskans the hardest, his analysis found, while dividend reductions would hurt poorer residents.

"There really is no magic bullet," Guettabi said in a phone interview. "The question is: Who are you trying to hurt the least?"

Gillam is one of many Alaska businessmen and women who have waded into the debate over the state budget. But he doesn't appear to have much company in his hatred of an income tax.

Among the signers of an opinion piece this month that advocated for a "responsible broad-based tax" on income or sales: retired banker Ed Rasmuson, Bering Straits Native Corp. chief executive Gail Schubert, and Jeff Cook, an energy consultant who's been the Alaska lobbyist for Koch Industries.

Other groups including the Alaska State Chamber of Commerce and the Keep Alaska Competitive Coalition are asking legislators not to increase oil taxes. But they're not lobbying against an income tax.

"I would rather pay taxes and have work than live in a tax-free state without a job," Jim Jansen, chairman of transportation company Lynden and president of the Keep Alaska Competitive Coalition, wrote in an email.

So far, legislators said, they haven't heard from constituents responding to Gillam's anti-tax ads. In interviews, lawmakers' own opinions about the campaign ranged from frustration to a shrug.

"It's a free country," said Fairbanks Republican Sen. Click Bishop. "Bob Gillam can do what he wants to do."

After hearing Gillam's radio ad, Homer Republican Rep. Paul Seaton, who has himself proposed income tax legislation, accused the investor of "distortions of reality."

He cited a section of Gillam's ad in which the narrator argues the deficit could be closed by changing state oil tax policy that keeps oil "in the ground." Newly developed oil, Seaton pointed out, is currently subject to a tax break that allows producers to reduce the oil's taxable value by 20 percent.

"Oil in the pipeline, if it is not generating revenue to the state, does not pay the bills," Seaton said.

Tom Begich, a newly elected Anchorage Democratic senator, was even more blunt.

"Bob, get responsible," Begich told a reporter who asked him about the investor's campaign. Begich added: "I hope that the future of the U.S. and Alaska isn't a bunch of millionaires telling us what to do."

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