Contrary to Paul Jenkins’ opinion piece on Sunday, the Alaska House Majority Coalition has passed legislation that is the genuinely conservative path forward. The plan will eliminate the deficit and create a stable and sustainable economic blueprint for Alaska’s path forward. Ours is the only plan that achieves both these goals. And, it does not depend upon either an increase in oil production or oil prices. Instead, it rests on real information and real data — the knowable, in other words.
Jenkins asserts that the income tax we propose is stiff. In reality, to have the fourth lowest state income tax in the United States cannot fairly be viewed as overaggressive. In fact, if you are a single person earning $60,000, you would — effectively — pay no income tax under the AHMC plan, although you would receive a smaller Permanent Fund dividend. This would mean, at bottom, that you would continue to receive many state services free of charge — an impossibility in our sister states.
Next, Jenkins asserts that Alaskans don’t desire an income tax. He’s right about that. Mr. Jenkins claims, however, that polls reflect that less than half of Alaskans see the wisdom of an income tax. On that score, he’s wrong. He neglects to mention that a poll this year, commissioned by the State Senate Republican majority, shows that 54.6 percent of the respondents support an income tax, “strongly”, or “somewhat strongly”.
Mr. Jenkins also highlights Connecticut as the poster child for the supposed correlation between taxation and poor state economies. However, the Center on Budget and Policy Priorities, in its 2017 report, “State Taxes and State Economic Performance,” found otherwise. For example, among its other findings, that report highlights that after the state of Kansas cut its highest income tax rates by 29 percent and eliminated all taxes for S Corporations, LLCs, and partnerships, Kansas suffered a devastated economy, especially in comparison to states contiguous to Kansas which have similar economies and made no such “reforms”. Meanwhile, Connecticut ranks 12th for good quality of life on U.S. News and World Report’s 2017 Best States list. Alaska ranks 43rd.
Here in Alaska, our own Institute of Social and Economic Research (ISER) at UAA, in another 2017 report, found that cutting Permanent Fund Dividends and instituting a statewide sales tax would hit young families most painfully, while an income tax would be less impactful upon them. It’s especially noteworthy that our Alaska House Majority Coalition plan would keep PFDs at a higher level than any competing fiscal plan that is under serious consideration.
Ironically, the Koch-funded Mercatus Center study, touted by Jenkins, notes that “oil-producing states highlight the danger of expanding revenue based on volatile revenue sources.” This helps explain why the Senate’s plan — hoping for increases in both oil production and per barrel price, while draining our last cash reserves — is not a prudent path forward.
Equally problematic is the Senate’s proposal to cut an additional $750 million from the state operating budget over a three-year period. ISER reports that such cuts would result in the loss of 10,000 public and private sector jobs. The Senate’s cut would reach the bone marrow, symbolized by the ostensible necessity of closing Pioneer Homes which the Senate, however unintentionally, recommended.
Look, no one wants a state income tax. But, there’s merit in following a plan supported by research and that “pencils-out”. There is folly in following what I call the Las Vegas model: an economic gamble, all done to avoid tough political decisions and temporarily stave-off our difficult and obvious realities.
Finally, if you’re in business, whether large or small, ask yourself this question: do I want to see the Legislature return in January 2018 with at least a $700 million deficit, and be left to wonder for the fourth year in succession, whether and how politicians expect or hope to eliminate that deficit? Or, do I want to put this matter to rest, conservatively and predictably, so that we Alaskans and our businesses can see the future, and once again plan and dream?
• Rep. Andy Josephson is a Democrat representing Anchorage’s District 17.
