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Alaskans should be willing to pay their share with an income tax

  • Author: John Havelock
  • Updated: May 31, 2016
  • Published January 26, 2015

Gov. Bill Walker wisely introduced Alaskans to some of the grim realities of their future with his budget message of cuts, even in the sacred area of education where cuts mean increased social and economic liabilities down the road. But where were the tax increases? Put off for a year means a shorter political process in which the enemies of taxes, and they are many, can more successfully use the weapon of delay in our two-year legislative term.

Maybe he can deliver a general revenue address in due course including the required revision of oil and gas taxation still in the works.

Maybe the Legislature will take a lead? Not a chance. Perhaps a few souls in super-secure seats will introduce a bill or two, but they all know that supporting a new tax is a sure road to defeat. The first objective of virtually every legislator is to hold the job (and that's an argument for a single, six-year term limit.)

Alaska's demographics promise opposition on any path to a balanced budget. At least a third of Alaska's residents, particularly those who came here for oil industry jobs, plan on leaving the state before too long. Put plainly, most of these don't give a tinker's damn about Alaska's future, leaving them free to oppose any dampener of current, personal income -- and they vote.

Top of the list in necessary taxes is the revival of Alaska's income tax, the repeal of which was Gov. Hammond's greatest regret. Getting it back will require a strategy combining benefit with loss. It is no secret that many of those for whom $1,500 is an inconsiderable sum view the Permanent Fund dividend as a giveaway to Romney's 47 percent, better spent on general appropriations. A constitutional amendment that fixes the PFD as a percentage of earnings of the Permanent Fund but not to exceed $1,500 with adjustments for inflation, and combine that with an automatically triggered income tax when revenue from natural resource taxes falls below an established proportion of the average of the last three years. OK, this is not a precise prescription, but you get the idea of combining carrot and stick.

With new loopholes and deductions, the national income tax is not as graduated as it once was. You have heard Warren Buffett state that he pays a lower rate than his secretary. So the old state income tax, stated as ten percent of federal taxes, can be restated as three percent for those with taxes under $5,000 up to 20 percent of those paying federal taxes above $50,000. Again, this is a conceptual framework, not a prescription.

In the old days, the Legislature commonly stated taxes and fees as specific amounts, without considering inflation. The Legislature can conduct a rigorous review of all of these, updating amounts and including authority in the Department of Revenue to issue each year a new amount reflecting national inflation. I can hear critics saying that these amounts are chicken feed, given the magnitude of the problem. I can also hear Illinois Sen. Everett Dirksen's alleged quote: "A billion here, a billion there, pretty soon you are talking about real money."

A particular part of tax policy is the area often called "sin taxes." There is good reason to tax cigarettes and alcohol. The public costs of abuse still easily exceed the revenue raised. We need to be sure the state levies an appropriate tax on these and on the incoming marijuana trade but not so high as to create a lucrative black market. A sales tax on expensive luxury items falls into the same measured category.

The state has not looked at other revenue sources in a very long time. Mining and timber both generate state costs with modest state return, part of the overall irony in Alaska's economy that every new person coming into the state generates uncompensated state expenses.

Yes, with all this we may still have a deficit, but if we are going to ask oil to pay the lion's share, Alaskans should be willing to show they are not all about greed.

John Havelock is an Anchorage attorney and former Alaska attorney general.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com

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