Commentary: It’s time to restore the state income tax

By John Havelock
For The Cordova Times

A state income tax and a Permanent Fund dividend, or PFD, make a good match if the state Legislature can overcome its political fear of restoring the income tax and hold the PFD as a bargaining instrument.

Alaskans are way overdue in recognizing that state government is not free and that the costs must be met by revenue from the state’s economy. Oil revenue hid this requirement for a generation, but oil can never do the job alone.

The graduated income tax is the fairest method of raising revenue, because it leaves the poor alone and raises income proportionate to the bounty that Alaska has given the taxpayer. It can also catch the six-figure income guys who commute to the field from Oklahoma and Texas.

The Legislature is also in turmoil about the PFD. Those with money tend to think it is a frivolous topper off Jay Hamond’s imagination. But for village Alaska, it is an essential supplement enabling the maintenance of a traditional subsistence lifestyle. The many among us who are poor also find in it the beginning of a life with food and lodging. Millions go into child support deficits and other debts.

Blend the dividend with the income tax. It is reportable income anyway. File your return on the state income tax of (say) 40 percent of the federal obligation and deduct the divided (maybe $1,600 per family member) proportionately. Include in the legislation an automatic inflation adjustment every two years. For most Alaskans this math will still produce a nice dividend.

All talk of growth depends on establishing an income base, Otherwise, new business activity just cuts the government support for the existing economy.

Yes, this is not the only new income that the state needs, but you have to start somewhere and this is the best opportunity.

John Havelock served as attorney general of Alaska under the administration of Gov. Bill Egan, and later as a professor of Justice at the University of Alaska Anchorage. He resides in Anchorage.