Jenkins: How can we trust these guys with an income tax?
By Paul Jenkins |
Another year, another Legislature, and lawmakers are hard at it again, scratching hither and yon for ways to dig into Alaskans’ pockets to pay for our over-size government.
Faced with a full fiscal plate, a yawning budget gap, the question of the Permanent Fund dividend’s fate, a pandemic, a comatose economy and a host of other pressing issues, who could blame legislators for seeking a little fiscal solace with an income tax?
There are at least two income tax measures containing a combined 56 pages of legalese awaiting action in the House, if it ever gets to work. The measures are sure to get more than a little attention as the Legislature scratches for money to pay the bills and mop up its red ink. The proposals, House Bill 9 and House Bill 37, were introduced by Rep. Sara Hannan, a Juneau Democrat, and Rep. Adam Wool, a Fairbanks Democrat, respectively. How many hundreds of millions of dollars those proposals would drain from Alaska’s already sputtering public-sector economy is anybody’s guess.
The state, at this point, may or may not need an income tax. Its cash reserves are kaput. Oil revenue is down and uncertain. The administration of Joe Biden is unlikely to be a friend to resource development states. State labor contracts get more expensive annually. Certainly, there may come a day when there is no alternative to such a levy, but the question is: Can Alaskans trust this — or any — Legislature with an income tax?
The left and other big-government types, rapturous at the prospect of foisting income redistribution on the unsuspecting, have been beseeching the tax gods for such a levy since Alaska’s income tax was axed in 1980. That tax was adopted by Alaska’s Territorial Legislature in 1949 at 10% of a taxpayer’s federal income tax liability. It did what taxes inexorably do; it increased. By 1975, it was changed to a progressive levy, with a top rate of 14.5%.
People by 1980 were fed up with the tax as the state found itself swimming in new oil money. There were moves to kill the tax, but Republican and Democratic lawmakers, desperate to head off a popular Libertarian tax repeal petition on the November 1980 ballot, in September repealed the tax, heading off the vote. Alaska was the only state at the time to have had an income tax and dump it.
Nowadays, this is one of only 10 states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming and Tennessee — without a personal income tax.
Periodically, over the years, there have been attempts to resurrect an income tax in Alaska. Former Gov. Bill Walker proposed one in 2015. In 2017, there was a lengthy, knock-down-drag-out legislative brouhaha spearheaded by a Democrat-led House coalition determined to adopt a “modest, progressive” levy. A poll at the time showed it was opposed by something like 58% of Alaskans. The lawmakers euphemistically named their proposal the Education Funding Act. It would have raised about $600 million for government coffers.
The ugly fight to get that tax on the books had some of the richest, most powerful Alaskans and businesses — seeking to protect their interests — tossing bushels of money into a consultant-driven, full-court press to persuade Alaskans and their lawmakers to embrace the income tax and welcome smaller Permanent Fund dividend checks. Despite their efforts, the measure died before a resolute Senate.
Would lawmakers simply use new income tax revenue to ramp up spending? Given the history of Alaska’s Legislature, it is a fair question. That history is rife with fiscal recklessness. Since 2013, Alaska lawmakers have been spendthrifts, draining Alaska’s cash reserves of $16 billion to pay for their profligate spending and make ends meet.
Should the latest in the long parade of Legislatures that have demonstrated absolutely no spending discipline be trusted with direct access to our paychecks? You can be assured that when government runs short of cash, the first thing lawmakers will try to do is increase the income tax, not trim government to fit revenues.
Given our Legislatures’ long, colorful histories of fiscal irresponsibility, it comes as no surprise this Legislature has yet to act on Gov. Mike Dunleavy’s suggested constitutional amendment that would require a vote of the people before a new tax or tax rate could be enacted.
Perhaps there is no other way out of Alaska’s fiscal morass but to add an income tax to the revenue mix, but is now the time? If it is, there is a more critical question that needs an answer:
Can Alaskans trust this Legislature with an income tax?
Paul Jenkins is editor of the AnchorageDailyPlanet.com, a division of Porcaro Communications.