Alaskans could be forgiven for feeling like Phil Connors, the TV weatherman played by Bill Murray in the movie Groundhog Day, when it comes to the state’s response to the ongoing budget crisis.
The Legislature is once again back in session to consider Gov. Bill Walker’s proposal to impose a 1.5 percent tax on the wages of Alaskans earning $75,000 or more a year.
This is the second year in a row that Walker, an independent, has proposed the adoption of an income tax to cover at least part of the annual budget shortfall. Despite his protests that the proposal is really a “head tax,” a tax on income is an income tax, plain and simple.
Legislators by now must be feeling like weatherman Connors themselves — doomed to wake in a city that is not their home and repeat the same debate about how to cover the cost of state services, and run headlong into the same deadlock with their colleagues over which Alaskans should pay more for those services — over and over again.
Two years of constant in-fighting, failure to reach compromise and the inability to pass meaningful legislation. What is the answer?
The only way to escape this time warp is for our state’s leaders to learn from past mistakes and change the behavior patterns that burdened Alaska with a $2.5 billion deficit in the first place. That means addressing the policies that result in Alaska consistently being ranked among the least attractive places in the nation to do business.
Alaska is already one of the nation’s most expensive places to live, so legislators should think twice before adding to the burden of working families. With the state limping through another year of recession with the nation’s highest jobless rate, taking a bite out of Alaskans’ take-home pay is the wrong way to revitalize the economy.
Almost two years ago, my family and I chose to leave our Alaska home to seek a more prosperous path. Burdened by the high cost of living and a recent job loss, we moved south but our hearts stayed in Alaska. It is frustrating to see the place I called home for so long, head down a path of self-destruction.
New taxes are not the answer. Taxes don’t create wealth — they simply redistribute money that someone else has earned by employing labor, creativity, and enterprise to generate value from the kinds of resources we have in abundance. As long as the size of Alaska’s economic pie continues to shrink, there will be less and less to go around, no matter how you slice it.
Instead of new taxes, what Alaska needs is a fiscal plan that restores sanity to the budget process by reducing spending and encourages investment in the state’s sizable resources.
The state’s current budget crisis is the result of low oil prices and declining North Slope production, but the fiscal situation has been made worse by years of Legislatures that failed to live within their means.
Legislators can’t set the price of oil, but they can make Alaska more competitive by enacting stable regulatory and fiscal policies designed to attract the private-sector investment necessary to harvest the billions of barrels of new oil reserves whose discovery the state has worked so hard to make possible.
The first step toward achieving this goal is to put the state’s fiscal house in order with a series of targeted cuts that bring spending down to a sustainable level. When you’re in a hole, stop digging.
Second, legislators should cap unrestricted general fund spending to ensure future legislatures don’t revert to bad habits once the price of oil rebounds.
Finally, structural changes to the $61 billion Permanent Fund would allow lawmakers to use a small portion of the investment earnings to pay for essential services. No one is suggesting we give them the keys to the piggy bank, but providing the Legislature with a reliable source of revenue to pay for truly essential state services would remove the need to tax working Alaskans while ensuring that a reasonable dividend program survives for future generations.
New revenue alone won’t close the budget gap as long as spending remains unchecked and oil production continues to decline. The Percentage of Market Value plan put forth by the Senate, though, would provide the revenue to see the state through potential shortfalls while giving new oil discoveries time to come online.
We cannot tax our way to prosperity. We can, however, make Alaska a more attractive place to invest and stay. If we continue to repeat the mistakes of the past, though, more young families will leave in droves as legislators once again engage in the same political battles about who should pay for state services.
Anne Seneca is a 25-year resident of Alaska who is currently pursuing economic opportunities in Texas. She hopes to return to Alaska with her family soon.