This article was first published on January 29 in the Anchorage Daily News.
OPINION: Personal taxes on Alaskans would be harmful
By Erick Cordero Giorgana
Alaska’s newly elected and returning state legislators will face the annual challenge of balancing our state budget during a time when oil prices continue to fluctuate. Revenue forecasts are poor, which likely means that legislators are having bills drafted to impose new taxes on hardworking Alaskans. But the range of harmful consequences for any new personal tax is broad, as outlined in a recently published economic study.
Unfortunately, a bad policy like an income tax continues to be taken seriously. A proposal to create a new income tax on Alaskans was put forth by the Alaska House Ways and Means Committee in 2021. That’s just the tip of the iceberg: In 2021-22, more than 30 bills were introduced by individual Alaska legislators proposing all manner of new taxes and fees.
During the past few years, due to the COVID-19 pandemic and related federal legislation, Alaska received an infusion of relief funds, which made it easier for legislators who might otherwise have struggled to balance our state budget. To add to that, the war between Russia and Ukraine that erupted in 2022 caused oil prices to spike significantly, creating an influx of state revenue from oil taxes. And while the Legislature didn’t spend it all, the fiscal year 2023 budget was very large and frankly irresponsible. The capital budget, which usually funds one-time project-related expenses, was the highest it has been in many years.
With the stream of federal money now waning, the fiscal year 2024 budget will be a completely different story. Legislators will likely be looking for even more ways they can tax Alaskans rather than have to make hard decisions about streamlining the state budget. And yet it’s clear that new personal taxes will only make things worse.
The new study, titled “The Economic Implications of an Alaska Income Tax or Its Alternatives,” found that if new personal taxes are enacted in Alaska, its economy and population will continue to shrink. This is an obvious concern for our already struggling state.
It’s no secret that Alaska has a higher cost of living than residents of the Lower 48. What most Alaskans may not realize is that this means we pay a federal income tax premium. The new study found that the federal tax burden for Alaskans is so high that it’s essentially comparable to (and often more than) state income taxes paid by residents of other states.
In fact, Alaskans would have to pay twice as much in state income taxes as in many other states if we reimposed an Alaska individual income tax. This means that new personal income taxes foisted on Alaskans would add a grievous financial burden to those already struggling to get by in these times of high inflation.
Among the consequences of increased taxes is the rise in resident outmigration. As many of our businesses and industries are already experiencing a shortage of employees, this situation will only be magnified by outmigration. Recently, the University of Alaska Center for Economic Development issued a report confirming that net outmigration is indeed occurring, meaning there are more Alaskans leaving than people moving to our great state — with a clear, negative impact on the economy.
As Alaskans, we’ve always taken pride in being trailblazers — we set an excellent standard by repealing our income tax more than 40 years ago, and other states have since followed suit. Just in the past two years, 21 states have either eliminated their income tax or reduced their tax rates. In this instance, Alaska needs to stick with the pack.
During a time of economic uncertainty, the introduction of new personal taxes will hurt Alaskans. Our state budget should instead be balanced by focusing on policies that emphasize cost containment, ensuring that spending is kept within reasonable limits. It is imperative for policymakers to drive our state toward efficiency and reduction of burdensome regulations so that our economy can recover and Alaskans can thrive.
Erick Cordero Giorgana is vice president of operations at Alaska Policy Forum. He has a BA in political science and a minor in history from Loyola University in New Orleans. Before joining APF, he worked as lead staff to several state legislators and served on the Mat-Su School Board.