Though the Legislature is not looking to adopt a state sales tax or income tax this year, most lawmakers know it is inevitable. And most Alaskans should know it too, considering how we have dipped into savings more than half of the past 30 years to pay for services and the revenue gap is only getting worse.
But which tax? Which is fairest to the largest number of people? Which is best (least worst) for the economy? And how do taxes compare with further cuts in public services and the prospect of an even smaller Permanent Fund dividend to balance the budget?
The House Ways and Means Committee, which is trying to better understand the options, the pros and cons for when Alaskans are ready to accept the end of their tax-free life, held a hearing last Saturday to learn from two people who have thought a lot about the questions.
The underlying premises facing Alaskans are: State revenues and spending do not match; overdrawing the Permanent Fund is recklessly irresponsible and would damage the fund long term; more budget cuts hurt communities and people; so, at some point, Alaskans need to pay something toward the services they want and enjoy.
Carl Davis, research director at the Washington, D.C.-based Institute on Taxation and Economic Policy, and Brad Keithley, a former resource law attorney turned founder of the group Alaskans for Sustainable Budgets, ran through economic models, charts and numbers of multiple tax types for the committee.
Aside from all the projections and assumptions and graphs showing who is wounded the most, or least, by a state income tax, sales tax or smaller dividends, Davis and Keithley offered some simple yet sound advice to Alaskans.
"Try to stay clear of any hyperbole,"Davis said near the end of his presentation. The risk is that emotional, politicized economic projections can mess up intelligent debate and decisions.
"There is no clear best"tax type for Alaska, Keithley said. It's a matter of balancing the effects on jobs, on different regions of the state and the overall Alaska economy.
"In most places, taxes are a fact of life,"Davis reminded lawmakers.
Alaskans will do well to remember those words of advice when we finally summon the political courage to decide how we want to pay for state-funded public services.
Taxes are not popular, but they will not destroy Alaska, and maybe they will even help. Just think of the time elected officials, candidates and the general public could better spend on other issues if we could solve our decades-long tax-free fantasy.
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