Ed. Note: Some people like to say Alaskan's do not pay taxes, just
because we do not have a state income tax. We like this essay for its viewpoint and
insight on taxes in Alaska.
NATURAL GAS, HOT AIR, AND MAKING TRACKS
By Kevin McGehee
Why on earth would people look at the
state government's chronic deficit and oppose spending cuts?
It's a reasonable question, because the
reasoning such people use to support their views has little to do with the planet on which
you and I live. The state's revenue base isn't growing; the only way to close the deficit
gap without spending cuts, is to impose taxes on Alaskans.
In any other state, almost the entire
state government would be funded by taxes paid by citizens. As a result, the size of the
state government would be controlled by the strength of the state's economy. But what we
have in Alaska is an unusual revenue situation. The market value of our natural resources
exported, is greater than the taxable value of the state's own economy. When the North
Slope oilfields were opened, the demands on state government were small enough that taxes
on Alaskans could be eliminated without damaging the government's ability to deliver
Unfortunately for good sense, the money
that came rolling in was many times greater than the government's needs. The sensible
approach remained popular enough, for a while, that the Permanent Fund was created. But
even so, the vast influx of money to the state treasury was too big. It began to burn
holes in the pockets of politicians who were backed by those groups with an interest in
inflating government spending. Forgetting that it wasn't their money, they began to spend
it with gusto.
And now, in an ironic twist, those who
sold their big spending schemes by pointing out that it was being funded by "free
money," now fight to defend those schemes by playing the guilt card: "You
Alaskans don't pay any taxes! You're spoiled!"
Don't pay taxes? That North Slope oil
belongs to all of us; therefore the money the oil companies pay in royalties and fees for
the privilege of extracting and selling that oil, also belongs to us. To the extent that
any of that money funds state government, we do pay state taxes. To argue that --
because the government lets us have back some of the portion of our oil
profits that the government doesn't spend -- we're actually subsidized by state
government IS SIMPLY ASININE.
Yet this is the argument being made by
the opponents of government spending cuts. Defeating this asinine logic depends on getting
the true logic of the situation in front of the people of this state so they can
see the "no spending cuts" argument for what it is -- an attempt to justify
metastasizing our current upside-down government funding situation into a Recipe (sic) for
ruin when, at some point in the future, the North Slope oil reserves really do run
Meanwhile, what about the Interior's
economic future? Well, there's a lot of talk about a few hundred new Alyeska jobs coming
to Fairbanks. Fine. If increased oilfield activity up north leads Alyeska to further
expand in the Fairbanks/North Pole area, that too will add to the strength of the local
economy. But where is the growth going to come from, if Alyeska doesn't Expand further?
The ripple effect from these new jobs
will be finite. To have sustained growth requires something else. Alyeska's contribution
is positive, but it weakens the diversification of the economic base. To bring real
sustained growth, a project must have the potential to invite a subsequent influx of new
opportunities. Alyeska's corporate edict doesn't meet that need.
The natural gas pipeline hasn't been
built, but it's already contributed a great deal of gas to discussions of the economy. I
think Fred Pratt's recent column on the proposal injects a much needed dose of reality --
the last thing we in the Interior need is a boondoggle that will drive up our already high
Neither the proposed natural gas pipeline
nor the oil pipeline itself really contribute the kind of open-ended growth potential that
the Interior, and in fact all of Alaska, desperately needs. Those of us who are here now
need a strong economy to make long-term prosperity possible. The next generation, if it is
to stay here instead of moving to the Lower 48 (or, worse, Anchorage) needs assurance that
whatever boom they experience when they're young won't have evaporated by the time their
own children come of age.
Which leads me to the debate over
ownership of the Alaska Railroad.
If no current or prospective owner or
management team is seriously contemplating linking the railroad physically to
Canada and the Lower 48, does it matter who owns it? Only as a purely philosophical
matter, I'm sure. Yet linking the Alaska Railroad to the transcontinental railroad network
that serves the manufacturers of goods we use, and also serves the consumers of goods we
do (or can) produce, is exactly the kind of open-ended growth opportunity that would make
all the difference.
Gov. Knowles made a lot of campaign
points back in '94 about adding value to our exports -- having raw materials extracted
from Alaska processed in Alaska. Economically, processing raw materials here before
shipping them out, makes only very limited sense. Once processed, the materials become
more vulnerable to damage in shipping, and the loss resulting from such damage is greater.
Yet in-state processing becomes more viable across a wider range of products if the
complications that currently apply to shipping from Alaska, are reduced.
A direct link to the transcontinental rail network
would do this. And while it's being constructed, it would be the "second
pipeline" that so many Alaskan bumper stickers pray for.
March 27, 1997 by Kevin McGehee North Pole, Alaska The ADVANCE ALASKA
ITA disclaimer: Editorials by various authors in our guest
section have been reprinted for your information and entertainment. The authors are not
necessarily members, nor do they necessarily agree with the philosophy, aims, or
endorsements of the Interior Taxpayers' Association.
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