Editorial: Nothing new in head tax proposal

  • By Peninsula Clarion Editorial
  • Tuesday, September 26, 2017 9:48am
  • Opinion

If at first you don’t succeed, try again. But if, after an extended regular session and multiple special sessions, the Legislature still won’t pass an income tax, it’s probably time to try a different approach.

On Friday, Gov. Bill Walker released his latest proposal to address the state’s multi-billion dollar deficit. This time around, Gov. Walker’s call for “new revenue” is packaged as a “head tax” on payroll wages and self-employment income. The 1.5 percent tax would be capped at the higher amount of $2,200 or double the amount of the previous year’s Alaska Permanent Fund dividend.

By linking the head tax to the Permanent Fund dividend, the administration is essentially proposing a progressive income tax — and again treating Alaskans’ annual Permanent Fund checks as public assistance.

According to a press release on the proposal from the governor’s office, a person with an income of $25,000 would have a tax bill of $375, which with a Permanent Fund dividend check of $1,100 would result in a net gain of $725 for the taxpayer.

At the other end of the scale, however, anyone making more than about $75,000 would owe the state the amount of their dividend and then some — $25 for those making $75,000, up to $1,100 for those making $150,000 or more.

In announcing the plan, Gov. Walker said the state needs a new source of revenue to pay for government services.

But this plan to us appears to be simply a reallocation of revenue to which the state already has access — if lawmakers had passed any of the plans to use earnings of the Permanent Fund. The Permanent Fund is supposed to be for the benefit of all Alaskans; drawing from the earnings to pay for the services all Alaskans use — public safety, education, transportation — would seem to be a reasonable use of Permanent Fund earnings.

The head tax plan, however, would appear to be intended to benefit some Alaskans more than others. We agree that lower-income Alaskans feel a greater impact from a cut to the dividend, but suggesting that higher-earning Alaskans should be shouldering the burden to inflate dividend payments isn’t the right approach either.

What’s more, the proposed head tax will raise $300 million to $325 million — certainly no small amount, but nowhere near the number needed to significantly close the budget gap. Just about every lawmaker in Juneau agrees that the way to do that is some sort of restructuring of the Alaska Permanent Fund, yet that’s not on the special session agenda.

When Gov. Walker announced a fourth special session to begin Oct. 23, we were skeptical that it would be productive without any new ideas on the table. The head tax plan isn’t new, and doesn’t appear to be an idea that the Senate majority will embrace.

Gov. Walker recently added consideration of a measure to make some necessary changes to the criminal justice reform bill passed in 2016. We hope legislators can work on the fixes for SB 91, but this tax proposal does not appear to be worth the effort of yet another special session.

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