Our initial reaction to the column is that it has been "time to act" since the government started spending well in excess of sustainable levels in 2011. See "It’s time to cut state spending: The numbers show future has arrived," https://goo.gl/MmzGFm (October 2012).
Where was the Empire back then? Our memory was still urging increased spending. But we agree nonetheless that it's still time.
It's not time for just any action, however.
Continuing to cut government spending deeply from current levels is one action in response to the state's fiscal situation and many argue a responsible one. But in voting this past session for bills that would permanently raise new revenues the majority of both legislative bodies decided against that approach because of the harm they perceive it would do.
In that same vein, not just any "new revenue" measure is the right one. Some approaches do much more harm than good to the overall Alaska economy and Alaska families.
In evaluating the effect of their tax reform proposal Congressional R's recently have focused on the effect on a family of four earning an income of $59,000. The Tax Cuts & Jobs Act: Policy Highlights, https://goo.gl/QZu8uH
Under the Congressional R's proposal that family keeps $1,182 more in take home income.
Applying that same benchmark, under both the Alaska Senate R's and House Majority Coalition fiscal proposals (which rely heavily on a PFD tax), that same family in Alaska suffers a reduction in income in the range of $4,000.
Not only is that reduction bad for the affected families, it is bad for the overall economy and other Alaska families as well.
Fortunately, there are other, better options.
If we have to go there, under a flat tax (designed to raise the same amount of new revenue as the Alaska Senate R's PFD tax) the drop in the income of the benchmark family of four would be reduced to $1,622.
In short, under a flat tax the benchmark Alaska family of four would keep roughly $2,400 more in take home pay than they do under the Alaska Senate R's and House Majority Coalition proposals. That family, as well as the overall economy and Alaska families would be far better off.
A flat tax also is more equitable.
It treats all Alaska families proportionately. Unlike under the highly regressive PFD tax at one extreme and a progressive income tax at the other, under a flat tax no Alaska family would be required proportionately to bear more of the costs of government than any other.
Under a flat tax all Alaska families would pay the same proportionate share of the cost of government.
In short, if we have to go there a flat tax is much better for the overall Alaska economy and Alaska families -- and much more equitable -- than a PFD tax, progressive income tax or other approaches.
Yes, it's time to act, but the action we take needs to be one that avoids making Alaska's overall economic situation worse.
It's not time for just any action, however.
Continuing to cut government spending deeply from current levels is one action in response to the state's fiscal situation and many argue a responsible one. But in voting this past session for bills that would permanently raise new revenues the majority of both legislative bodies decided against that approach because of the harm they perceive it would do.
In that same vein, not just any "new revenue" measure is the right one. Some approaches do much more harm than good to the overall Alaska economy and Alaska families.
In evaluating the effect of their tax reform proposal Congressional R's recently have focused on the effect on a family of four earning an income of $59,000. The Tax Cuts & Jobs Act: Policy Highlights, https://goo.gl/QZu8uH
Under the Congressional R's proposal that family keeps $1,182 more in take home income.
Applying that same benchmark, under both the Alaska Senate R's and House Majority Coalition fiscal proposals (which rely heavily on a PFD tax), that same family in Alaska suffers a reduction in income in the range of $4,000.
Not only is that reduction bad for the affected families, it is bad for the overall economy and other Alaska families as well.
Alaska is in a recession. According to last year's unrefuted economic analysis by the University of Alaska-Anchorage's Institute of Social and Economic Research, raising new revenue through a PFD tax as the Alaska Senate R's and House Majority Coalition have proposed:
- “Has the largest adverse impact on the economy [of all the new revenue options] per dollar of revenues raised,” https://goo.gl/ZxR1Hw at A-15;
- Is “by far the costliest measure for Alaska families,” https://goo.gl/ivf9D2 at 1; and
- “[W]ill likely increase the number of Alaskans below the poverty line by 12–15,000 (2% of Alaskans),” https://goo.gl/iuTjv2 at 14.
Fortunately, there are other, better options.
If we have to go there, under a flat tax (designed to raise the same amount of new revenue as the Alaska Senate R's PFD tax) the drop in the income of the benchmark family of four would be reduced to $1,622.
A flat tax also is more equitable.
It treats all Alaska families proportionately. Unlike under the highly regressive PFD tax at one extreme and a progressive income tax at the other, under a flat tax no Alaska family would be required proportionately to bear more of the costs of government than any other.
Under a flat tax all Alaska families would pay the same proportionate share of the cost of government.
In short, if we have to go there a flat tax is much better for the overall Alaska economy and Alaska families -- and much more equitable -- than a PFD tax, progressive income tax or other approaches.
Yes, it's time to act, but the action we take needs to be one that avoids making Alaska's overall economic situation worse.
Call your representative and tell them if we have to go there to support a flat tax instead of a PFD cut or any other new revenue measures.
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