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OPINION: Proposed income tax is a wolf in sheep's clothing

October 12th, 2017 | Greg Sarber Print this article   Email this article  

I was able to attend the town hall on Oct. 5, held by Rep. Paul Seaton and Office of Management and Budget Director Pat Pitney? They presented the governor's budget plan which calls for using the Permanent Fund earnings reserve, along with a newly imposed income tax to fund state government? There appeared to be a broad support in the audience for this plan, including the concept of an income tax? But before we all collectively hurdle off of the income tax cliff, there are some points to consider;

1. From OMB numbers, in FY 2019 the proposed income tax will only pay for about 8 percet of the budget? The budget gap without the permanent fund or taxation amounts to 55 percent of the budget? The income tax comes nowhere close to fixing the budget gap.

2. The income tax is initially proposed to be relatively painless to the average worker in Alaska? If the PFD is continued, most of us will not have any net tax payment to the state; the tax is about the same as a PFD check. Isn't that curious?A tax with little revenue generated and no cost to taxpayers?

3. Given that the income tax doesn't generate very much revenue and doesn't solve the fiscal problem, you have to ask yourself why has the governor proposed implementing it?

The answer is that this proposed income tax is a wolf in sheep's clothing. It is designed to be painless initially, in order to get broad support? What Rep. Seaton and Pitney don't want us to realize, is that once an income tax is established, it is very easy to raise tax rates when the State needs additional funding? The relatively benign income tax plan they propose now, is not the same one you will have in 10 years? Income taxes will certainly go up significantly in coming years and we will all be the poorer for it.

Income taxes are probably not the best solution to our fiscal problems? Some alternative sources could provide revenues with less impact to Alaskans:

1. How about more creative taxes on summer visitors? Tourism is a big industry in both Alaska and Hawaii? In Hawaii there are state hotel and rental car taxes of 13.25 percent and 15.27 percent respectively? Alaska has no statewide hotel tax and a rental car tax of only 10 percent?

Hotels and rental cars are primarily used by tourists in the summer?Nearly 2 million visitors come to Alaska every summer? Visitor taxes on hotels and cars could be made a seasonal tax, to capture summer tourism money while minimizing impact to Alaskans in the winter? Why haven't we maximized this source of revenue?

2. Along that same thought would be a statewide seasonal sales tax, from June 1 to Sept. 1? This would also capture tourist dollars spent in the summer and minimize impact on Alaskans for the rest of the year.

3. How about a better and more efficiently run state government? The fact that the state runs airports and the ferry system in the red every year is a perfect example of something to work on?Condor Airlines flies daily nonstop flights between Frankfurt and Anchorage every summer? How about a head tax on every flight of European tourists that visits in the summer? We have a head tax on cruise ships, how about summer airline head tax? That might at least help pay for the airports.

If we only captured an additional $190 in tax revenue from every summer tourist visitor it would generate the same revenue as the proposed income tax? We all agree that we are at a financial crossroads in Alaska?We do not all agree that the best solution is an income tax at this time? There are other good and less painful revenue streams to tap first before we implement a state income tax?This is not the right time to implement an income tax and if we do, we will certainly regret it down the road.


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