WALKER TAX: $200 MILLION … $700 MILLION … $100 MILLION?
Compromise doesn’t come easy for a governor who has made his living as a litigious attorney. But today, Gov. Bill Walker offered a compromise. It was immediately rejected by his best political friends: The Democrats.
Why? The compromise didn’t bring in enough taxes.
Walker has struggled to establish a need for taxes, and the proof is in the fact that in 17 months, he has asked for an income tax that would raise $200 million, then one for $700 million, and now one for $100 million.
It appears that some tax — any tax — would do, so long as the governor can get the camel’s nose under the tent.
WALKER’S TAXING HISTORY
2016: Walker in January of 2016 said the state absolutely needed $200 million in income taxes or massive layoffs would ensue.
He proposed a simple income tax, but it failed in the Republican-led House and Senate.
If it had passed, Alaskans would be paying taxes to the State of Alaska from the income they are earning today.
By blocking the 2016 proposal, HB 250, Republicans saved Alaskans $200 million — money they are allowed to keep for their own families.
2017: Walker needed not just $200 million earlier this year, but nearly $700 million in income taxes. He alluded to it in late 2016 — his next tax proposal would be higher. He made good on that promise.
Walker worked behind the scenes with Rep. Paul Seaton of Homer, a Republican so liberal his party has abandoned him, to advance HB 115, designed by the Walker administration in concert with a Connecticut tax professor, Dr. Richard Pomp, who never once testified in front of the legislature about the complicated bracket scheme. The original version was so flawed that even Seaton had to pull it back for massive rework.
HB 115 was so complicated, Alaskans would have to hire a tax accountant to complete their tax bill to the state.
In the interim between 2016 and 2017, Walker used his considerable political muscle to flip the House to Democrat control. The 22-member majority is solidly all-in for an income tax — and no further cuts in State spending.
But the Republican-led Senate would not budge earlier this year.
2017: Now, in special session, the governor recognizes the impasse is real. But he has offered yet another income tax: This one raises just $100 million. He might still need the 60 Revenue workers it was predicted would be needed for his last proposal, to the tune of $14 million in government expenses to collect.
Walker is calling it an education head tax, but it’s an income tax. Those who make up to $20,000 a year would pay $50, and those in the $500,000 and up range would pay $500.
This is also what’s known as a “gateway drug,” for government, as it puts an income tax on the books, which the governor and Democrats would come back and “reform” in subsequent legislative sessions.
In his compromise package, Walker also asks for $85 million from increased motor fuel taxes.
But he offers not a single cut to state spending.
“That’s not a compromise. That’s asking for a surrender.” – Tuckerman Babcock, chairman of the Alaska Republican Party.
By now the governor has a Democrat-led House so radicalized that even he can’t even control it. They rejected his proposal before it even hit their desks. As articulated by Rep. Gabrielle LeDoux earlier this spring, “If the Senate thinks we are going to get out of here with just the POMV (Permanent Fund restructuring) they have another think coming.”
Apparently the governor has “another think coming,” too, according to that logic.
BUSINESS COMMUNITY REACTS
ProsperityAlaska, a pro-business group headed by long-time businessman Scott Hawkins, responded to Walker’s tax plan with a full-page ad in four newspapers — the Fairbanks NewsMiner, the Kenai Peninsula Clarion, the Juneau Empire and the Alaska Dispatch News. The ad called out Walker and the Democrats for demanding taxes from Alaskans when they aren’t needed to balance the state budget.
“Walkerocracy,” the ad’s headline reads, with a definition that describes it as “a bureaucracy that proposes new taxes on its citizens even though they are unnecessary.”
“If you look carefully at the numbers, we already have enough money to support government at roughly current levels without new taxes,” said Hawkins, who is an economist by training.
“Moving to a percent-of-market-value (POMV) approach to managing the Permanent Fund would close the majority of the budget gap and fund dividends at respectable levels,” Hawkins said. “This would require very small withdrawals from state savings that could be sustained for well over a decade.”
The newspaper ads are similar to a direct mail postcard that arrived in the mailboxes of tens of thousands of Alaska voters. ProsperityAlaska was also responsible for that mailing.
In addition, the group teams up with the Alaska State Chamber of Commerce and the Resource Development Council to grade lawmakers on their votes as they pertain to making Alaska a business-friendly state. Finally, ProsperityAlaska is associated with The Accountability Project, which has weighed in on state legislative campaigns in recent years.
“We want Alaskans to understand that some of our leaders are trying to put one over on us. There is no crisis. “This is a hard-left agenda to penalize working people in order to grow government,” Hawkins said. “Beyond the fact that it isn’t needed, an income tax would hammer an already-ailing economy, deepening and lengthening Alaska’s current recession.”
Babcock added that if the governor wants $100 million, he can get it by cancelling his “fantasy gas line.”
WALKER’S COMPROMISE GROWS STATE SPENDING BY $200 MILLION
- Offers no spending cuts, but actually agrees to the Democrats’ $200 million increase in state spending.
- Cuts down his tax request, while providing no documentation to the public as to why he needed $700 million two months ago, but only $100 million now.
- Accepts a shortfall of $300 million that could be paid for with savings, even though just weeks ago he said he would not accept anything but a fully funded plan.
- Shrinks the Permanent Fund dividend.
- Accepts the Senate’s version of SB 26, a restructuring of the Permanent Fund.
- Establishes a compromise on oil taxes, but only if he gets his “head tax” and only so long as there are no cuts to the budget.
SENATE SAYS ‘IT’S A START’
Senate President Pete Kelly called the governor’s proposal a good starting point.
“The Senate Majority appreciates Gov. Walker offering a solution. The only way to reach agreement on the issues before us is when all parties are willing to sit down and have a real discussion. These are important issues with real-life consequences for hundreds of thousands of Alaskans. The Senate is currently evaluating the Governor’s proposal. While we’ll agree on some points and disagree on others, an operating budget for FY2 is our highest priority,” he said.
“When we swore an oath of office, we vowed to discharge our duties. Our sole requirement, under the Constitution, is to pass an operating budget each year. The Senate is committed to prioritizing that action, and there is no time to waste. July 1 is fast approaching,” Kelly said.
“We have called on and will meet the House at the conference committee table to carry out those budget negotiations, as we do every year. We have said many times we stand ready to negotiate. Our goal is to deliver a reduced budget that continues essential services for Alaskans, avoids unnecessary layoffs and delivers stability and certainty to our private sector.
“The Majority appreciates the Governor’s willingness to step up with a comprehensive proposal and, while we prioritize a budget, we will continue to talk with the Governor to achieve consensus.
“We have requested additional detail on his proposal, which will help our members make an informed evaluation. We are pleased to see the Governor agrees a small structural deficit – easily absorbed by reserves – such as the Senate included in its fiscal plan, is acceptable,” Kelly said. “The Senate Majority remains strongly opposed to an income tax.”
Sen. Kelly and other members of the Senate leadership asked the governor for clarification. They sent a letter to the governor today, looking for guidance on the following topics:
- “HB 57/HB 59: Operating & Mental Health Budgets – House versions – Is the intent of your proposal to restore all Senate cuts or just the more significant cuts? Does your proposal include forward funding education from the earnings reserve account at $1.7 billion as in the House version?
- HB 111: Oil and Gas Tax Credit Reform – Senate plus 100% ring fencing – Your administration shared language relating to the ring fencing provision with the Senate on Saturday, June 3, 2017. Is this the language you propose to achieve the stated goal of “100% ring fencing?” If not, please define “100% ring fencing.” Does your administration have modeling showing the impact to industry of implementing ring fencing? How would you intend to address shared development costs.
- SB 12: Education Head Tax – Is your goal to reach $100 million in revenue? Is it your intent that this tax is designated? If so, to education generally, or to school facilities, construction and maintenance, as in SB 12? Is it your intent that this tax must be bracketed? Are there other changes to SB 12 you would advocate for in a final bill? What year do you intend this tax to take effect (to be assessed on income)? What are the costs associated with developing and implementing the tax, both initially and ongoing? What is your proposed approach for collecting from self-employed individuals?
- SB 26: Permanent Fund Protection Act – Some provisions in the House CS are clean-up and a good approach; does your proposal accommodate such changes? The Senate version of SB 26 features appropriation and draw limits; please confirm that these are included in your proposal.
- SB 23: Capital Budget – Governor’s priorities plus Senate deferred maintenance and oil and gas tax credit payment – Please identify your proposed priorities. Please be specific in listing, other than deferred maintenance and oil and gas tax credit payments, which items from the Senate version your proposal includes or does not – whichever list is shorter.