Dunleavy may support a state sales tax, he tells legislators in private meetings

This line caught my attention in the Anchorage Daily News coverage about Gov. Mike Dunleavy telling lawmakers in a closed-door meeting that he might like the idea of a state sales tax: “Some lawmakers wondered aloud why the governor would put forward a tax proposal three months into a four-month legislative session.”

Wondering aloud is a polite way of excusing Dunleavy’s chronic dithering, his defining characteristic on budget matters since the recall movement sent him into a high-speed retreat in August 2019.

The proposed budget for the next fiscal year could have a deficit of $600 million to $800 million or more that would have to be filled by reducing state savings, unless there is new revenue.

Four months ago Dunleavy said that carbon sequestration would solve our financial problems and there was no need for “tired thinking” about taxes.

“The reason we landed on this is it doesn’t gore any ox,” Dunleavy said at a December press conference, describing the too-good-to-be-true solution.

His 10-year budget forecast says the state will collect $300 million in new revenue starting in July, tripling in three years to $900 million a year.

“For years the conversation on revenue was: Whose ox are we going to gore? Are we going to do an income tax on the people of Alaska. Are we going to do corporate taxes? With the advent of the monetization of carbon, we have a real possibility of receiving revenue that doesn’t gore any ox,” Dunleavy said.

He made it sound like the ungored oxen would be producing free money within months, a claim on a par with the wit and wisdom of George Santos.

“This creates new wealth and it creates wealth that comes in from the Outside, which I think is exactly what we want for the monetization of carbon with our resources” he said.

“With support for our carbon monetization bill, we’ll change the conversation about new revenue from the tired thinking of the past,” Dunleavy told Alaskans in January.

“We’ve been told by some that we can generate as much as $30 billion or more over 20 years, just from our forest lands alone,” he said in his 2023 State of the State speech. “If possible, that’s a game changer.”

“With new revenue from our carbon initiative we can enact policies that are welcoming to kids and families,” he said. “For Alaska to compete for the next 50 years we need to be a place where families want to be.”

But the fiscal notes attached to his bills didn’t attach real dollar numbers to the carbon plan for the first five years and legislators have shown healthy skepticism.

Now we hear that Dunleavy privately told legislators he would be OK with a sales tax.

An income tax is a better option for Alaska, as it would allow the state to collect from the out-of-state residents who earn big money during their regular visits to Alaska work sites on the North Slope or elsewhere.

There are many reasons why a sales tax is not the best option to raise revenue. For starters, a local sales tax is a major revenue source for many local governments across the state. There are also higher costs to implement and audit a sales tax than an income tax and the tax hits low income families harder and penalizes people in rural areas where prices are higher.

I agree with Anchorage Rep. Cliff Groh, who said this about the sales tax proposed by Rep. Ben Carpenter, the Kenai Republican who hired former temporary budget director Donna Arduin for guidance:

“This would be a stealthy tax that would be hard for Alaskans to track and would also impose compliance costs on businesses.  If the State of Alaska adopts a broad-based tax, I much prefer a high-earner tax that applies to large incomes made by residents and non-residents in Alaska.   A high-earner tax would be more fair, more predictable, and better for the great majority of Alaskans than a stealthy statewide sales tax.”

The admission from Dunleavy, though it was made privately to legislators and has yet to be followed by action, is that someone’s ox has to gored, which is progress of a sort.

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