“The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the smallest possible amount of hissing.” – Jean-Baptiste Colbert, finance minister to Louis XIV of France.
Jean-Baptiste Colbert described what HB 115 is attempting to do in 2017.
Less than a week ago, Rep. Paul Seaton, a tax advocate from Homer, whipped out a completely new plan for his proposed income tax in HB 115.
There’s going to be some hissing from Alaskans.
The radically different HB 115 was a complicated piece of tax machinery that must have taken him months to complete.
Except that Seaton didn’t do the work.
The plan came from the Department of Revenue at the direction of Gov. Bill Walker.
This may be one reason Seaton’s s aide, Taneeka Hanson, was struggling to answer the House Finance Committee’s questions this week about the new “progressive” tax structure and its impacts on the lives of real Alaskans.
Hansen told the Finance Committee that she would have to defer to the Department of Revenue on matters of detail. She only had the high-level talking points in front of her.
Except that the Department of Revenue also didn’t do the work.
Revenue brought in an outside contractor to design the income tax, said Seaton, as he attempted to explain why neither he nor Hansen could answer simple questions, such as, “Can landlords take deductions off of their rent income, or do they have to declare all rent as income, even though they have expenses related to the property such as maintenance?”
The public doesn’t know who the contractor is who designed the governor’s tax plan or what tax policy he or she represents. Must Read Alaska has asked for the information through a public records request. We are told off the record that the contractor was paid more than $100,000.
Carl Davis, who works for the Institute for Taxation and Economic Policy, has been advising Democrats and Seaton, who are running House Finance. Davis is on the phone a lot during the committee’s discussions, available to answer committee questions on the new “progressive tax plan” being debated.
Today, Davis wrote an extensive opinion at the ITEP blog, lauding Gov. Walker’s tax plan as “the right balance.”
Whoever the author of the governor’s new tax plan is, they are in lock step with ITEP; the plan looks like it came directly from the institute.
THE MAN BEHIND THE TAX CURTAIN
Who this Institute on Taxation and Economic Policy that is influencing income tax for Alaska?
ITEP describes itself as a “non-profit, non-partisan research organization” that works on federal, state, and local tax policy issues. Robert Reich, former Labor Secretary under President Bill Clinton, is on its board. But others who are on the board or on the staff have published bios that boast of their passion for income taxes and closing corporate tax loopholes.
ITEP has received funding from various poverty-focused foundations, and these are some of them:
- Annie E. Casey Foundation
- Bauman Foundation
- Coydog Foundation
- Ford Foundation
- Nathan Cummings Foundation
- Popplestone Foundation
- Steven M Silberstein Foundation
- Stoneman Family Fund
“ITEP’s mission is to ensure that elected officials, the media, and the general public have access to accurate, timely, and straightforward information that allows them to understand the effects of current and proposed tax policies. ITEP’s work focuses particularly on issues of tax fairness and sustainability,” the organization writes.
Taxation fairness is a laudable goal, but the definition of fairness is entirely subjective. Ultimately, ITEP’s recommendations are to redistribute income. They would love to add Alaska to their “win” column for personal income taxes.
One Capitol observer is not impressed: “An economy based upon taxing one another instead of increasing production of goods and services to sell to the rest of the world is to attempt prosperity by taking in one another’s washing,” said the retiree, on condition on anonymity because he’s from Juneau, after all.
Tax Foundation is another think-tank group, and is the opposite of ITEP. It advocates for less taxation and more economic growth. Here’s what Tax Foundation says about ITEP’s push for “highly progressive income taxes” in ITEP’s most recent annual report, “Who Pays?”
ITEP advocates tax policies that suppress economic growth in favor of income redistribution.
Unlike ITEP, Tax Foundation believes that a tax system should choose long-term economic growth over short-term redistribution.
The relationship between economic growth and taxes is compelling. Tax Foundation research concludes that the most harmful taxes to growth are corporate and individual income taxes, followed by consumption (sales) tax.
Right now, economic growth is what most business leaders say Alaska needs the most.
“The more we try to make an income tax progressive, the more we undermine the factors that contribute most to economic growth: investment, risk-taking, entrepreneurship, and productivity. This is because high-income earners tend to do much of the saving, investing, risk-taking, and high-productivity labor,” writes the Tax Foundation in response to the ITEP report on all 50 states’ tax policies.
ITEP recommends that state and local governments rely on unstable sources of revenue.
ITEP suggests states move more toward progressive income tax systems. However, Tax Foundation argues that income taxes are the second least stable form of taxation, following corporate taxes.
Tax Foundation analyzed state and local government financial data obtained from the U.S. Census Bureau to come up with this chart showing the stability of various tax schemes:
“In their analysis, ITEP punishes states that depend heavily on consumption taxes as a main source of revenue while advocating moving toward income taxation,” says Tax Foundation’s criticism of ITEP. “Depending largely on a volatile source of revenue can cause budget issues in the event of an economic downturn.”
HEARINGS WEDNESDAY AND THURSDAY
Americans for Prosperity Alaska has put out a call to action, in an effort to mobilize Alaskans and get them to put pressure on legislators. On Tuesday, the Alaska Chamber of Commerce launched a robust ad campaign against the income tax.
Click here for details on the public hearings on HB 115. You can watch the hearings and at 360north.org.