The Legislature will meet on Oct. 23 to consider adding revenue for the state of Alaska. Alaska is the only one of the 50 states without an income tax or a sales tax. Our Republican-led Legislature has refused to use its tax base. Instead, we have tried something new; we mail money out to all residents every year. We are also reluctant to adjust taxes on the oil industry, the wealthiest industry in the world. Is it a puzzle that we have a deficit?
Alaska had an income tax from 1948 during territorial days and until 1980 after statehood. The state income tax was a simple percentage of the federal income tax. It served us well, and as a side benefit, it was deductible from the federal income tax. It enabled the Territory to deal with domineering fishing and mining interests, and it paid for the Constitutional Convention of 1955, laying the foundation for Alaska statehood. It was simple, easy to administer, and other states envied it. As a percentage of the income tax actually paid to the IRS (bottom line on IRS Form 1040), it worked!
In addition to restoring our income tax, we have some “low hanging fruit” to harvest. In spite of inflation, our motor vehicle fuel tax has not been adjusted in more than half a century. At 8 cents per gallon it is the lowest in the nation. Doubling it would make it a dime below the national average; tripling it would bring it into line with the other states. What are we waiting for?
A statewide sales tax should be off the table. Collection from many widely scattered small villages would make it costly and difficult to manage. It would require a whole new agency to administer it. Some communities already have a sales tax; adding a statewide sales tax would be unacceptable. Alaska has never had a statewide sales tax; sales tax should remain only as a local option.
Finally, sales taxes are regressive; the poorest people pay the same tax on goods as do the wealthiest. A graduated income tax is not regressive; Alaskans for whom the dividend means the most will pay the least, and those for whom the dividend means the least will pay the most. By helping to provide our state services residents will become citizens.
We can also adjust other fees, such as vehicle registration, and the royalty on mining products. When the dividend exceeds its original goal of $1,000, each extra $1,000 adds $7 million to the annual deficit, this can be controlled. But we cannot accept anything less than restoring our income tax and increasing out absurdly low gasoline tax.
Budget cuts have done significant damage to our economy already. When one considers our total rejection of ways to provide revenue, more cuts seem ideological with no clear ideology in sight.
Using savings is completely off the table. An annual income of $700,000,000 from interest on our savings is unavailable because we spent the savings that were earning this income. More than $13 billion ($13,000,000,000) from the Constitutional Budget Reserve and the Statutory Budget Reserve is gone. $700 million income per year is a big price to pay for spending savings. It is a bit like heating your home by burning it down.
Raising revenue is essential for Alaska now. There are ways to do it.
• Carl S. Benson, Ph.D., is a retired professor of geology and geophysics from University of Alaska Fairbanks. He resides in Fairbanks.
