“Must Read Alaska” on income tax proposal

Suzanne Downing writes at mustreadalaska.com.  Her commentary comes from the right, with a bit of color in her commentary.  I read this from her recent email newsletter and thought it worth sharing.  I don’t have a dog in the fight of the policy position, but I thought the framing and messaging of Downing’s opposition was notable.

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ALASKA’S BIG GOVERNMENT DEMOCRATS WANT YOUR MONEY: Democrats who are in control of the Alaska House of Representatives have a plan for your money. Your Permanent Fund dividend and your other income, to be exact.

HB 115, championed by House Finance Chair Paul Seaton with the silent backing of millionaire Gov. Bill Walker, asks you to pay the Walker Administration 15 percent of what you owe to the federal government.

In other words, if your tax bill to the feds is $10,000 a year, Alaska Democrats want you to pony up another $1,500 to the State of Alaska. Typical workers in Alaska pay between 25 and 28 percent of their income to the federal government. If you don’t pay federal taxes, you’ll have to pay $25 anyway to the State — and it’s not clear if this includes children.

HB 115 takes from one hand, but also would make sure you get about $1,100 in your Permanent Fund dividend in the other hand. That’s about half of what it should be right now, but this is all sleight of hand.

In the kooky world of Democrats, you’ll get half of your PFD, but still be paying over 25 percent of what they give you to the federal government, and then 15 percent of that amount to the State.

But wait, there’s more! HB 115 will let you pay your entire Permanent Fund dividend to the State to settle your tax bill by simply clicking a box on your PFD application, in which case your entire check will be wiped out (given to a state employee, to be exact).

In previous analyses, the Department of Revenue said it will have to hire more than 50 new employees to handle this mischief.

Alaska’s state budget has a $2.7 billion hole and Gov. Walker has stated he cannot find another cut. Not one.

HB 115 would, the Democrats assert, bring in $655 million annually. Rep. Paul Seaton, who is carrying the water on HB 115 for the Democrats, calls this a progressive tax because it hits affluent Alaskans harder.

Naturally, Alaska’s workers and job-creators are hoping that President Donald Trump reduces federal taxes, and if that is the case, the $655 million that the Democrats want will also get a haircut. They’ll have to come back for more than 15 percent, which is already among the highest State income taxes in the land. California taxes people at 13 percent and Colorado taxes 4.63 percent of wage-earners’ federal tax bill.

(Read about state income taxes in other states here.)

HB 115 was introduced Friday and today is in House Finance Committee for hearings that continue Tuesday, Thursday and Friday.

Rep. Cathy Tilton, District 12, said on Facebook that she opposes the bill and had nothing to do with its drafting or the sponsorship from House Finance, where she serves in the minority:

“For the record, I completely oppose the new income tax (among other things) bill (HB 115) introduced this morning and had no hand in its drafting and development. Do not assume that because it was introduced by the Finance Committee, that all members of the committee support it or had any role in writing it. The Republican Caucus members were in no way part of it,” she wrote.

Other House Republicans have said there need to be more cuts to spending before Alaskans are asked to fork over their hard-earned paychecks, especially since Alaska is in a deep recession.

Democrats have cuts in mind, but those cuts are to the incentives for oil and gas development in Alaska.

HB 115 would also use the Permanent Fund’s Earnings Reserve Account at about 4.25 percent of the fund’s market value. Some of that would pay for state services, while some would be used to give Alaskans $1,100 in dividends this year.

Similar “percent of market value” legislation is being proposed by Sen. Bert Stedman and Sen. Mike Dunleavy, who have different formulas for how to pay dividends and provide state services.

Check Must Read Alaska’s blog this week for more.