Alaska Needs Equitable Tax Regime

Today is the 92nd anniversary of Mother’s Day. The annual occasion when we formally acknowledge one of God’s greatest gifts: Moms.

Few realize though that this magnificent holiday shares its longevity with another act of Congress that isn’t so celebrated: The 92nd anniversary of the sixteenth amendment that authorized Congress to tax income.

“Taxes” former Republican Supreme Court Justice Oliver Wendell Holmes Jr. once said, “are what we pay for a civilized society”. An honest commentary about why we reach into our pockets for government. The debate over taxes will always center on who pays and how much.

In Alaska, we need an equitable tax policy. For the last decade as our economy has shifted to a service/retail economy, policy makers have failed to take a comprehensive view on taxes and their relation to the economy.

On February 19, 2002 while speaking to the Legislature, then Senator Frank Murkowski spoke against any new state taxes. “Proposals are being made to pull money out of our economy through taxes rather than put money into the economy with jobs, growing our economy, development” he bemoaned. But in the midst of negotiating the most expensive oil & gas development project in history, he unilaterally raised oil taxes.

Alaska would have faired better if the increases came as part of a comprehensive fiscal plan. That strategy would have provided more revenue to the state when oil prices are high and provided gas line investors with the confidence that the state was serious about protecting the economics of the $20 billion dollar pipeline from arbitrary tax increases.

Without fiscal stability, gas pipeline opportunities including the All Alaska line will be hampered. How can the state assume risk of ownership without a structurally sound budget? Fiscal stability would give the state more independence to move our gas to market. It would also provide stable resources to afford the costs associated with economic growth that will hit years before the revenue from the pipeline flows.
 
Two years ago the legislature arbitrarily singled out the vehicle rental industry for taxation. And while it’s fair to ask my customers to contribute for the state services they impact, it’s not fair to continue providing political protection for those who should also be contributing. Unfortunately it was my very own State Senator who offered the most alarming explanation.

“What are you complaining for? It’s paid for by the pigeons at the airport”, Sen. Ben Stevens shouted through his Juneau speakerphone on January 12, 2004. Obviously failing to read the research that showed many of those “pigeons” as he called them are his constituents.

However last week the State Senate approved a $275,000 exemption to that same vehicle rental tax. So after eliminating death benefits for newly hired Police and Firefighters due to cost, the Senate approved a tax break for individuals who rent U Hauls to move from Alaska.

The cruise ship industry also enjoys the benefits of Alaska while enjoying political protection from state taxes. Last session after the governor proposed a small tax on cruise passengers, large multi-national cruise ship operators brushed him off promising their lobbyists would kill it. And they did.

Meanwhile small Alaskan companies - who support local economies year round while the nearest cruise ships are thousands of miles away - will contribute over $11 million this year in direct state taxes and fees. And this favored tax treatment for the cruise industry has extended to infrastructure provided for their passengers as well.

While the Alaska Railroad’s taxpayer funded airport rail depot –used by seasonal cruise passengers for free- pays the state a mere .08 per sq. ft. compliments of political cronyism. The proposed airport car rental garage built with private funds will pay the state .77 per sq. ft. on top of  $4 million a year in gross revenue receipts.

In the future more responsibility for economic development will land on the shoulders of the private sector. An equitable tax regime, where all who benefit pay a fair share to support state services and a stable fiscal environment to promote investment in Alaska is essential.