'Predatory taxes' and the fiscal fantasy offered by the Dunleavy/Koch Network
The picture painted by Gov. Mike Dunleavy when he talks about state revenue is one of a future free from “predatory taxes.”
We need to follow the example of Colorado, he says, and enact a constitutional amendment that would make it much harder to institute a new tax or raise a tax. House Joint Resolution 5 would strip citizens of the power to enact new taxes by initiative and require that any tax be approved by the Legislature and the voters. He also wants a spending limit, detailed in House Joint Resolution 7.
According to Dunleavy, Colorado’s economic prosperity is due to the Taxpayer Bill of Rights, a 1992 Colorado measure that he and the Koch Network want to see adopted in Alaska. The version Dunleavy is promoting for Alaska is more restrictive than the Colorado plan, where taxes are considerably higher, and it would require government services to shrink as the years pass—especially during periods of higher inflation and population growth.
There has been little press coverage in Alaska about this issue or what it would mean. The one-sided sales pitch from the Dunleavy administration and the Koch Network has not brought any of the pitfalls to light.
In the Dunleavy/Koch Network presentations, the governor said the tax plan from Colorado is a proven path to prosperity.
“What’s happening in Colorado right now? Did the economy collapse? Is it falling apart? It’s the second hottest economy in the nation right now. Investment is flooding into Colorado. It’s becoming a center for high-tech and other industries because they know if they go to Colorado, there’s not going to be a predatory tax imposed upon them. The state of Washington is somewhat similar. It’s got the hottest economy right now due in part to low electrical prices, but in the state of Washington there’s no income tax. And every time they talk about an income tax—Democrats, Republicans, independents—they don’t support it. So there’s no income tax in the state of Washington,” Dunleavy said.
“You do something similar here, get our spending reined in…. you’re going to see investment flowing into Alaska like you’ve never seen before and then we’ll be able to build a private economy like other states have done,” he said. “And when you build a private economy you bring in more jobs, more opportunities. This allows municipalities, if they so choose, to tax some of those industries, to tax some of those jobs. They grow at the municipal level.”
Attorney General Kevin Clarkson echoed the “predatory tax” talk at another edition of the road show, saying the amendment will make life predictable and profitable for industry in Alaska.
“They can decide to invest in Alaska without having to worry about the risk that Alaskans will continue to spend out of control and try to pay for that spending by imposing a predatory tax on industry, so they can actually feel secure to invest in Alaska,” Clarkson said.
The claim that slashing public services in Alaska and making it difficult to raise taxes on the oil industry and other industries will somehow build confidence in Outside investors and lead to immense levels of new investment is impossible to believe.
Instead of creating a stable investment environment, the Dunleavy plan would do the the opposite. Before putting money at risk, every potential investor would recognize the dangers created by policies that will encourage Alaskans to see the oil industry, the mining industry and all other businesses as ideal targets for higher taxes.
A few things to keep in mind about Colorado and Washington.
Colorado has a state income tax of 4.6 percent and a state sales tax of 2.9 percent. It has a state gas tax of 22 cents a gallon.
Washington has no income tax, but it has a state sales tax of 6.5 percent and local sales taxes that push that to 10 percent or more in Seattle and other areas. The state gas tax is 49 cents a gallon.
Alaska has no state income tax and no state sales tax. It has a state gas tax of 8 cents a gallon.
The Dunleavy portrait that the Alaska economy will boom with new investment if we manage to continue our no-tax policies and cut public services is a fantasy.
“We can conclude that state and local tax fiscal policy is not predictably a major driver of economic growth in the U.S., particularly in more recent decades,” economists Dan Rickman and Hongbo Wang of Oklahoma State University have concluded. “There does not appear to be any economic benefit from deviating greatly from other states in the structure of state and local fiscal policy.”
Or as Robert Godby, director of the Energy Economics & Public Policies Center at the University of Wyoming, told the Seattle Times, “If taxes where everything, California would be empty and Wyoming would be bursting at the seams.”
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