Income tax for Alaska

by Robin Smith

Alaska is the only state that doesn’t require either income or sales taxes to run the government. Alaska has been fortunate to have had sufficient oil income since 1980 to pay all the bills and send each of us a check every year. We’ve gotten away with murder! But that time is over with the continuing pressure on oil prices.

It is true Alaska spends significantly more money per capita than any other state. Part of that is the money spent on our Permanent Fund dividends and additional state dollars are put into savings for future checks. Low-population, rural states are very expensive to run. We require same infrastructure needs of any other state, yet ours is geographically the largest state in the country and we divide those expenses over very few people. We also have numerous cost drivers due to small communities off the road system, and we have the most expensive healthcare in the country.

Over the past two years the Legislature has reduced the general fund spending by 25%. Additionally the Legislature made major revisions to the Criminal Justice System and in Medicaid reform to reduce more costs. Most of the “fat” has been cut, but we still have a fiscal gap of $3 Billion.

Why do Alaskans think they shouldn’t have to pay for services the state provides?

Where should we cut in order to avoid taxes? I’ve heard testimony from people saying they don’t want taxes and they don’t want their PFD cut. Unfortunately they never say what services they get from the state they are willing to give up.

The Alaska Chamber is running television ads speaking out against income taxes. Their businesses require roads, educated employees, courts, law enforcement and all the other systems that a state government provides. The lack of broad-based tax revenue makes it difficult for Alaska to respond to services required by new development or an increase in population.

According to a 2003 ISER study, any new non-oil-producing employment becomes a net drag on state finances. Who do they think will pay for those services? What cuts do they think we should we make? The Chamber offers no solution.

I commend the House Majority for coming up with a plan that spreads the financial costs more fairly amongst Alaskans. These men and women are statesmen not politicians. They are risking their future elected offices for the best interest of Alaska. It is time for Pete Kelly and the Senate Majority to join them in making these hard decisions, cooperate with the House, and prioritize the economy over keeping their jobs in the legislature.

Everyone is going to have to pay, including the oil companies. With the abundance of oil in the market and the price of solar power dropping by 20% in just this past year, oil may never again be the singular engine that drives our Alaska economy. Now is the time to diversify our revenue stream.

•An income tax would provide the state with much needed financial stability. It takes money from the richest Alaskans who have succeeded due to the opportunities the state has given them. It would also include the 20% of Alaskan employees who live out of state while making large salaries in the oil and mining industries. Many lower income Alaskans would be exempt.

•A sales tax targets everyone but is a larger percentage of a low-income family’s budget than a wealthy one. Already many communities have a sales tax to fund their needs. All cities and communities across Alaska will most likely be implementing a sales tax to replace the money the state won’t be distributing to them.

•The PFD cut hurts low-income families the most. It is the hardest cut because it hits every individual child as well as adult. These families spend their PFD checks, which spurs our economy unlike wealthy families who would likely put it into savings.

•We simply don’t have the money to give tax credits to oil companies. Would it even incentivize the industry to increase drilling with the cost of oil as low as it is today?

It is important to everyday Alaskans to continue getting a PFD. But if the Senate Majority continues the plan of raiding our constitutional reserves to fill the budget gap, Alaskans will lose it all in just a few years. The legislature needs to keep our economy going and strengthen our infrastructure. It takes money to do that. We need that broad base tax revenue. Additional cuts will only prolong the recession we are entering. The Senate must act. Offering a lottery to fund schools makes no sense.

I want a state that provides high quality education for our children. I want children to be safe in their homes and communities. I want a state that can respond to wildfires and floods, a state that protects our salmon; and celebrates the wild environment in which we live. All this takes money. We must pay.

Even with the income tax, Alaskans will have the fourth lowest tax burden in the country. I could make the suggestion that if you want to live under another state’s tax laws please move, but I won’t. We are privileged to live in Alaska. The time has come to pay for the privilege.

My husband and I own a successful small business. We are in the highest tax bracket. We are willing to pay our fair share to keep Alaska strong. How about you?

Robin Smith of Anchorage is a 36-year resident of Alaska.