Taxes not the answer for sustainable economy

When I tell young Alaskans about the economy I found here 42 years ago I often see disbelief in their eyes. Unlike today, every industry and job paid substantially more than the Lower 48. A good all-round hand in an Alaska logging camp earned about $5,000 per month compared with the $3,846 I paid for the new Dodge Powerwagon I drove here. Top mechanics and cooks earned as much as $7,000. Today that new truck costs $30,000 but the wage premium all but disappeared. After a few years I headed to Oregon to obtain a graduate degree. When the starting wage for a choker-setter in Alaska was $10.79 per hour, I rented a Cessna 150 with fuel in Oregon for $7. A full breakfast on campus cost 99 cents.

That economy of 42 years ago meant that the Alaska income tax was tiny compared to the wage premium. The last full year Alaska had an income tax the state collected $117 million. Today that same tax would bring $300 to $400 million and require as many as 600 new Juneau employees. Not only has most of the Alaska wage premium disappeared but fewer Americans pay a net income tax due to transfer payments and earned income tax credit. Many more Americans are on the dole today.

In the meantime petroleum taxes and royalties allowed Alaska to build a larger state and municipal government than our economy can support. I fear that some will now want to maintain this government structure by taxing initiative and hard work (an income tax), thereby causing ambitious young Alaskans to go elsewhere. Government can easily discourage the people we most need for a new economy. Moreover, I cannot imagine a worse economic message than to pay $1 billion in checks to every Alaskan regardless of effort or contribution while taxing the Alaskans who work and pay a federal income tax. The question is not how to support the government oil built but how can we create the economy we need now, and the answer is not through income taxes.