A state income tax would not help

  • By TOMAS BOUTIN
  • Monday, May 22, 2017 10:22am
  • Opinion

There is no nonviolent way more certain to destroy Alaska society and culture than an income tax concurrent with the Permanent Fund Dividend.

Taxing Alaskans who produce goods and services the world wants to buy while handing out that same several hundred million dollars to everyone regardless of effort and initiative would deal a blow much more severe than has the long-expected decline in oil production. In a state with record-low workforce participation and unequaled dependence upon payments from government, we already discourage work. Thank you to the Alaska Senate for voting down HB115.

We produce less of what we consume than any other state. The extent and duration of any state recession will be due to low productivity and our consumption of goods and services from elsewhere, not to a lack of taxes. The size of our government is uniquely disconnected from the size of our economy.

Only a short time ago Alaska had a $25 billion oil economy. Now we have an $8 billion oil economy. But aggregate consumption, including state and municipal government, remains high. We cannot replace lost oil production by taking in one another’s washing. Every day we wear out and consume products made by Boeing, Subaru, General Mills and Lucerne Dairy, but we produce none of these goods ourselves and we produce too little oil, fish and minerals to pay for them.

Government spending of one-time reserves has held government harmless but consumption and production must come back into balance. An income tax would make the road much rougher for workers, even as people living on government payments were protected. Don’t be misled by anyone who would manufacture in the media an artificial Bernie Sanders emergency to penalize productive Alaskans. Taxes could keep government spending high but solve none of our problems. Alaska law already allows anyone who wants to do so to pay into the state general fund.

The state operating budget has not been reduced. The budget approved by the House increases spending. Appropriations to prior year capital budgets, supplemental funding tucked into capital budgets, converting line item spending to program receipts, transfers from cash to bring down accounts payable, eliminating unfilled positions, moving spending to independent agencies, disaster declarations and other devices falsify changes in spending and appropriations. The media and others are befuddled by the difference between cash flow and the balance available for appropriation. The very large components of Education, Humanities &Social Sciences and Corrections dwarf any necessary and routine belt-tightening at smaller departments.

When I first arrived in Alaska we had an income tax. We barely noticed that tax but now Alaska jobs that might best withstand an income tax have disappeared. I drove here directly from the only state that has never had a so-called broad-based tax, New Hampshire. But the income tax was entirely veiled by the Alaska pay rate differential we then enjoyed. Logging, commercial fishing, fish processing and other jobs paid so much more than the same jobs elsewhere that the income tax was insignificant. A choker setter made $11.79 per hour, with lots of overtime at $17.69. A middle-aged all-round hand made $5,000 to $6,000 per month, and good cooks made $7,000 per month.

By contrast, the sticker price on the new 1973 Dodge Powerwagon I drove here was $3,640. When I later went to graduate school in Eugene, Oregon, a basic eggs-potatoes-toast-coffee breakfast cost 99 cents, and I rented admittedly tired Cessna 150s for $7, including fuel. Today even good-paying jobs at Greens Creek and Kensington don’t pay a monthly wage exceeding the price of a new 4WD pickup (about $35,000), and rent on any aircraft costs several hours of wages.

Due to the Alaska pay differential largely disappearing, especially in the private sector, the detriment to the economy and to the families of fish processors, miners and loggers from the HB115 income tax would be nine to ten times greater than was the case for the income tax we had in 1973. The notion that we can hold our economy harmless taxing the weakening private sector is silly and wrongheaded. Morality and common sense dictate that we do not prop up government by taking from working Alaska families what they have earned from their own sweat and spunk.


• Tomas Boutin is a forester. He and his wife moved to Juneau from Haines in 1983.


 

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