Page 1629 – Must Read Alaska

Governor’s ‘Pomp Tax Plan’ author hasn’t been made available for questions

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March 30, 2017

*Dr. Richard Pomp, a law professor at the University of Connecticut, was contracted by the Alaska Department of Law to provide a blueprint for a new income tax for Alaska, according to the contract.*

The contract for Dr. Richard Pomp, the man who wrote the proposed Alaska income tax that was inserted by the Governor into House Bill 115, shows that Pomp has been on contract with the Walker Administration since Nov. 4, 2016.

And he will remain on contract through June 30, 2017.

Although his contract stipulates he’ll be available to testify on the bill he authored, he has not yet been called by the co-chairs of House Finance, which is hearing the bill this week.

He’s not been seen in the Capitol as questions are raised by both committee members and the public, for whom this tax plan is a difficult structure to understand.

Public hearings continue on Thursday. The committee, dominated by Democrats, could vote on HB 115 on Friday, if the co-chairs choose to move the bill out of committee.

“Version L” of HB 115 introduced numerous tax brackets and marginal tax rates. There are precious few deductions.

Alaska Natives who receive Native Corporation dividends get those taxed at 2.5 percent, while Alaskans with trusts get taxed at 7 percent. All income – pensions, fixed, rental, or wages – is treated as income. Even unions pensions are taxed as regular income.

The devil of this tax plan is in the details, however, and there are precious few details to be found in HB 115. Most of the tax rules will come through hundreds of companion regulations that would have to be written by the Department of Revenue.

Republican members of House Finance have posed numerous questions that neither Rep. Seaton nor his aide Taneeka Hansen have been able to answer this week.

Seaton allowed Gov. Walker to insert the “Pomp Tax Plan” language into his pre-existing bill, which had an entirely different tax plan in its original form.

But the news that Pomp was hired by the Administration to write the income tax plan came out Monday and has reverberated throughout the Capitol.

Instead of hearing from the author himself, the committee has heard from Carl Davis, who is a research director at the Institute on Taxation and Economic Policy, a pro-income tax group. Pomp serves on the board of ITEP.

Additionally, Pomp’s contract is not with the Department of Revenue, but actually with the Department of Law. Approved by Deputy Attorney General Jim Cantor in early December, the start date of Nov. 4 indicates the search for an appropriate person to write an income tax plan for Alaska took place throughout the fall.

In other words, Governor Walker’s Administration has been quietly working on developing new, more aggressive income tax legislation for months prior to the convening of the legislative session.

*Twitter messages such as the one above are a regular feature in Gov. Bill Walker’s Twitter feed.*

With Gov. Walker making statements weekly about the need for new revenue, it’s likely he signed off on the contract with Pomp. His Attorney General Jahna Lindemuth would also have been in the loop. Walker would have needed a tax expert with the “progressive tax” sympathies that reflect that of the Democrats, his current political allies.

Walker found that soul mate in Richard Pomp.

Pomp, whose curriculum vitae is 16 pages long, is a guy who lives, eats, and breathes tax policy. He is no stranger to Alaska, having served as a consultant to the Department of Revenue from 2009-2010. He has also been a consultant to the left-leaning Citizens for Tax Justice.

In the contract appendix, it’s noted that Pomp is expected to testify before the Legislature:

“At the specific direction of the Attorney General’s Office, the Contractor shall provide legal research and advice on two pieces of proposed legislation concerning income tax: 1) a personal income tax calculated as a percentage of the Adjusted Gross Income reported on federal income tax returns and 2) a measure to modify the rate structure of Alaska’s existing corporate tax and make provision for taxation of income from S-Corporations. It may be necessary to also provide expert testimony as the bills work their way through the legislature.”

Appendix D indicates that Pomp would be available:

“In full consideration of the Contractor’s performance under this agreement, the State shall pay the Contractor for the professional services of Richard Pomp $85,000 upon completion of the scope of work on or about December 15. That fee will include subsequent testimony on the work product.”

The concerns and questions keep adding up for HB 115, but the proposed income tax author is nowhere to be found in the Capitol.

And the author of the governor’s income tax is…Dr. Richard Pomp

Suzanne Downing

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March 29, 2017

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A University of Connecticut School of Law professor of tax law is the apparent author of the newest version of Governor Bill Walker’s income tax, HB 115, according to sources in the Department of Revenue.

Notable in the proposed income tax is how closely the tax structure that Dr. Richard Pomp has provided to the Department of Revenue mirrors the complex state tax brackets of Connecticut. Connecticut has a $15,000 personal exemption, for example; the one Gov. Walker is proposing has a $14,000 personal exemption.

Connecticut’s state tax system is unique and has various phase-out provisions that make it hard to compare with HB 115, but both tax systems contain several tax brackets. This bracketed approach is in contrast to the much simpler tax that Walker promoted last year.

Pomp is also on the board of the Institute for Taxation and Economic Policy, a pro-tax group that is being used heavily by the Democrat-led House Finance Committee. Pomp is said to have been paid $85,000 for his efforts on behalf of the governor and Department of Revenue.

Pomp is the author of a textbook, State and Local Taxation.

Testimony under way in House Finance today, with stiff opposition from most who are testifying. Rep. Paul Seaton, co-chair of the committee, and Rep. Les Gara, vice-chair, challenged several of those opposing the bill, indicating that they don’t know what they are talking about, and making sure they as tax proponents had the last word.

One testifier who owns a financial management company told the committee that over 100 jobs would be lost when financial companies who manage trusts move their operations to other states.

Bob Pawlowski, a retired captain of the National Oceanic and Atmospheric Administration, expressed concern about the impact of the income tax on pensions.

“As a senior, I think it’s really important that we have something that recognizes fixed income,” he said. “We bring a lot of money into this state but we have no earning potential.”

He also asked the committee to consider the impact of an income tax on military retirees, who have a choice to retire here or elsewhere.

Libby Dalton Slane, a 60-year resident of Fairbanks, said: “State operating costs have grown an average of 8 percent annually. Why is that? The answer is simple. We have a spending problem. Unemployment is the highest in the nation. You are already capping our PFD. Imposing an income tax will further damage our sluggish economy.”

She offered alternatives, including using existing savings to bridge to a sustainable budget in four years, implementing revenue limits, making spending reductions, and protecting the Permanent Fund Dividend as well as the Permanent Fund Earnings Reserve Account. In other words, she outlined much of what is in Senate Bill 26, which passed the Senate earlier this month but is languishing on the House side.

Kate Blair of Tesoro says there is a flaw in HB 115 as it relates to publicly traded companies and how the tax would apply to shares that are bought and sold numerous times. Blair is the government and public affairs manager at Tesoro Corporation.

Juneauite Judy Andree of the Alaska League of Women Voters supported the income tax because it is progressive. She opposes further cuts to State government.

Who wrote Governor Walker’s new tax plan?

Suzanne Downing

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March 29, 2017

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Who wrote Governor Walker’s new tax plan?

*Public hearings: Alaskans to offer their opinions starting today at 1 pm, when House Finance opens up HB 115 — an Alaska income tax — for public comment.*

“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.

[New tax plan for Alaskans. You’re going to need an accountant.]

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.

[Update: Dr. Richard Pomp of University of Connecticut, is author of Alaska income tax.]

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:

The chart above shows that the most volatile source of combined state and local government taxes are the corporate income tax, followed by tax on individual income, and sales tax. Property tax revenues are the least volatile from year to year.

“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.

Alaska Chamber launches campaign against income tax

Suzanne Downing

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March 29, 2017

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In a media buy that covers television and internet social media, the Alaska Chamber of Commerce today launched a major advertising offense against the proposed income tax.

In the ad, which began showing up today on social media channels like Facebook, small business owner Athena Fulton of Anchorage talks about how an income tax will harm her small business:

Curtis Thayer, president of the Alaska Chamber of Commerce, said a recent statewide poll showed that the majority of Alaskans agree with Ms. Fulton in opposing an income tax. Fully 58 percent oppose an income tax, while 41 percent support one to solve the state’s budget gap.

That 41 percent tracks with the tax-tolerant sympathies of the 4-in-10 Alaska voters who cast a ballot for President Barack Obama in 2012.

In the ad, Ms. Fulton refers to Rep. Les Gara and Rep. Paul Seaton as supporting Obama and his policies that hurt small business owners. The chamber has purchased ad time on GCI cable, Fox, and KTUU.

Rep. Seaton, a Republican from whom the Alaska Republican Party has voted to withdraw all support, introduced a new version of his income tax bill last week; this week he admitted that the new version was wholly provided by Gov. Bill Walker’s Administration.

The Governor’s version introduces a series of “progressive” tax brackets based on income. Also, it disallows important deductions such mortgage interest and charitable contributions. It is not simple. You may need to hire a tax accountant if this bill passes.

“This is a decision that was made based on the testimony we had,” Rep. Seaton said on Monday during House Finance discussion, when asked who had made the decision to design the taxes with income brackets.

“There was a tax consultant that was employed by the Administration to develop an income tax. and it was based on adjusted gross, which is what has been used in many other states.” – Rep. Paul Seaton.

Rep. Tammie Wilson, R-North Pole, reminded the committee that most Alaskans do not use itemized deductions when they file their federal income taxes, therefore they will not be able to deduct their state tax from what they owe the federal government.

Public testimony on HB 115, the income tax proposal, will be held on Wednesday at 1 pm for Anchorage, Fairbanks, and Juneau.

Then, starting at 5 pm, testimony from other Legislative Information Offices around the state will be taken. A list of LIOs is here.

For those not near a LIO, the call-in number is 907-586-9083. Be prepared to be on hold for some time, and they request that you hang up immediately after you testify to free up the lines.

Testimony is limited to two minutes.

Written testimony can be sent to: [email protected].

Access the meetings live through akleg.gov or 360north.org

More information on HB 115 can be found at the Alaska Legislature’s website. The original version of HB 115 is dramatically different from the current version, which is Version L, with the governor’s new tax plan in place of the previous Seaton plan. Helpful documentation can be found under the Documents tab.

Gasline anchor tenant signs ‘Dear John’ letter to Walker

Suzanne Downing

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March 28, 2017

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*Gov. Bill Walker in December 2015 signs a second MOU with REI’s Shun-ichi Shimizu, renewing the MOU the two parties had signed a year earlier.*

Gov. Bill Walker had a friend in the Japanese company Resources Energy, Inc. In fact, they kind of had a thing going.

So he thought.

The Japanese company represented potential buyers of Alaska natural gas, and selling gas to Japan is what has driven Walker for much of his professional life. REI gave breath to his hopes and dreams for an Alaska LNG project, which is why he ran for governor in the first place. That, and to “cut the state budget.”

So it had to be deeply disappointing to Walker this month when REI said sayonara and walked out on him.

The global LNG market is a tough neighborhood for Alaska’s high-priced resources.

IN THE WAY-BACK MACHINE

Walker is a street fighter. Starting in 2013, Walker used REI as one of the centerpieces of his campaign for governor, and he bludgeoned then-Gov. Sean Parnell for not taking a meeting with Walker and the Japanese company. Walker had brought REI executives to Alaska and said he could get a meeting with the governor.

Parnell wasn’t interested in meeting with Walker, who he knew was going to run against him. He also didn’t make time for REI. He had been meeting, however, with KOGAS, the Korean natural gas importer that is the largest in the world. REI, by comparison, was a new and entrepreneurial company formed by Japanese municipalities and manufacturers looking for their own supply of LNG. It was a start-up that didn’t have a track record, only aspirations.

Also, Parnell was forging “Heads of Agreement” documents with the three Alaska producers — ConocoPhillips, BP and Exxon. And he was busy resolving the Point Thomson legal dispute that Bill Walker had filed against the State and ExxonMobil in 2012.

Walker considered the refusal to meet with him and REI an unforgivable sin. He went public with his indignation and signaled his second run for governor.

“The most recent blunder … was Parnell’s refusal to meet with the dignitaries of the Japanese consortium, Resources Energy Inc. (REI) and afford them diplomatic courtesies,” Walker wrote in the Alaska Dispatch News in September, 2013.

“For decades Alaska has explored the viability of a large volume gas line anchored in long term contracts with the Asian markets. REI has made substantial investments seeking to buy state royalty gas at the wellhead for LNG production and shipment to Japan,” he said.

Walker went on to scold Parnell, saying he had some explaining to do.

A year later, Walker again scratched at the scab he had over Parnell’s refusal to take that meeting with REI.

The election season was in full swing by now. Just a couple of weeks before voters would choose their new governor, he blasted Parnell in yet another Compass piece in the Dispatch and in other newspapers around the state:

My 30-year history driving LNG projects vs. Parnell’s recent epiphany

In summary: Walker was the LNG project expert and Parnell didn’t know what he was doing. Never mind that he had never actually built a gasline in his 30 years of talking about one; he had mainly just filed lawsuits against the same producers he would need in order to move a project forward.

WALKER AND REI GO STEADY

Immediately after he was sworn in as governor in December, 2014, Walker fixed the perceived slight: He signed a memorandum of understanding with REI. The company was now first in the door.

On Dec. 23, 2014, Walker described the MOU as “an important step forward in securing Alaska’s energy future.”

After all, Walker explained, REI was formed to explore the possibility of purchasing natural gas from Alaska and to build liquefaction facilities and an export terminal to ship the gas to Japan and sell it for $9-$10 per million btu to Japanese customers. At the time, Japan was paying about $15 per million btu.

REI wanted to seal a deal with a long-term price from North Slope producers and begin shipping to Japan by 2020. It may not have had all the pieces together, but the company had an ambitious schedule. It opened an office in Anchorage, and conducted studies that showed an Alaskan LNG export project was not only viable but was competitive. Walker encouraged REI publicly — and repeatedly.

Further, he said, “REI has contacted many Japanese governmental and private organizations that also want to buy gas from Alaska. REI is also working on a smaller LNG project in Cook Inlet to begin deliveries by 2020. The state will work with REI on this project through a coordinated permitting system and potential partial funding through the Alaska Industrial Development and Export Authority (AIDEA),” according to his press release.

Must Read Alaska went looking for the 2014 MOU with REI but found it had been removed from the governor’s web page:

SIGNING MORE MOUs

In September of 2015, Walker signed another MOU, this time with Kyoto prefecture, where he went to meet potential buyers and give a keynote address at what he dubbed “high-level meetings discussing Alaska’s liquefied natural gas potential with top-ranking executives in Japan.” They included the chief executive of Marubeni Corporation, a large trading company that markets LNG, the governor of Kyoto Prefecture and former Prime Minister Yasuo Fukuda.

Must Read Alaska also went looking for that MOU on the governor’s web page, but it, too has been removed:

Of course, MOUs are not worth the paper they’re written on, but they’re symbolic “handshake” documents that tell the world something is going on. A company like REI especially found them comforting, and helpful when they approached investors. In Japan, having high-level government sponsorship is seen as exceedingly important. In Alaska, it’s more of a “defining the relationship,” (or DTR, to millennials.)

The Walker deal-making trips went on. The governor and his new team at the Alaska Gasline Development Corporation spent millions of dollars flying to Asia, Houston, and bringing potential buyers to Alaska. AGDC made a stab at opening an office in Houston, and finally did so. It is staffed with five contractors and costs $1 million a year. The governor and AGDC also quietly opened a gasline office in downtown Tokyo, renting space at $5,300 a month, with one employee, reconstituting the longstanding, official state trade office in Tokyo.

REI, meanwhile, decided it was smarter to move ahead with a less ambitious project — a smaller LNG export project using Cook Inlet gas and getting help from the Alaska Industrial Development and Export Authority — AIDEA.

That was 10 months ago.

In February of 2017, AIDEA described its work with REI this way: “REI is in the process of meeting with potential investors, looking for methods to fund needed FEED work for a large Southcentral LNG plant, and organizing with private energy companies. AIDEA continues to work with REI.” There were no other partners in the project.

That was one month ago.

THE ‘DEAR JOHN’ LETTER FROM REI

On March 23, 2017 the bad news came in the form of a letter from the Eiji Hashio, president of REI, to the governor:

“It is with regret that I write to you on behalf of Resources Energy, Inc. in Alaska and ERI in Japan to advise you that we will cease our efforts to develop an LNG export project for Cook Inlet natural gas as of March 30, 2017.

“This has not been an easy decision for us on the Japan side, but is one that is necessary given the present economics of LNG in Japan,” the letter continues.

“As you know from our involvement with our project, as well as the larger North Slope pipeline project, the Asian LNG market has seen significant price drops in recent years. A large supply of natural gas around the world has created continuing expectations for low prices from buyers. It also has made investors and commercial users reluctant to sign long term gas purchase contracts. Long term contracts are the starting point for securing a gas supply and the financing for plant construction. ERI in Japan simply could not secure the gas purchase commitments needed to advance our project in Alaska.”

REI was always a very small company, but they were Walker’s best hope for an “anchor customer,” the one he landed first, before he was governor. It was as close as he has gotten to a real gas marketing deal. He fostered the relationship, courted them, became governor and, like exchanging friendship rings, they signed MOUs together.

But the entire REI business model was to be a middle man for utilities. The market appears to have decided they were not needed in an era when the world is awash in natural gas.

Gov. Walker has another problem: He has stated that the only way the project would be viable is if the State of Alaska owns it, because the State doesn’t have to be as profitable as private companies.

“If economically viable, it will be financed by long-term purchase contracts secured before the first piece of pipe is laid, not by the Permanent Fund,” he said last August. “This is how projects around the world are financed and Alaska’s will be no exception.

“The project team, which includes our industry partners, have spent several years and completed over $500 million in engineering, permitting and necessary work to complete pre-FEED. Now is not the time to shelve that excellent work and start again at a future date,” he said.

Now, in his third year as governor, there are no partners. Has he actually set the project back?

AGDC BUDGET: RIPE FOR TAKING

AGDC, meanwhile, is sitting on its last $102 million that the Legislature agreed to last year, and the burn rate continues at an impressive rate on a project that most Alaskans express little faith in, according to a recent Alaska Chamber of Commerce poll.

AGDC wants to spend all the money next year — Walker’s re-election year — for marketing and federal regulatory work. The word in the industry is that AGDC will file a permit application with the Federal Energy Regulatory Commission by April.

But as lawmakers look to cut services in a budget crisis, can they really afford to advance a $45-60 billion project that seems destined for failure?

As Alaskans ponder the Walker’s plan for an income tax, and as he pays the head of AGDC $750,000 a year, (and a dozen other employees a cool $200,000 plus, and benefits for all), is he moving the project forward? Or were the former partners — ConocoPhillips, BP and ExxonMobil — right when they said now is not the time?

Governor Walker has not yet issued a statement about REI’s departure from Alaska and what it means to his signature project.

Bright, shiny objects: Seward’s Day, Earthquake Day, Charlo Greene

Suzanne Downing

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March 27, 2017

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*Collapse of Fourth Avenue near C Street in Anchorage due to a landslide caused by the earthquake on March 27, 1964. (U.S. Army photo)*

MAGNITUDE: Today at 5:36 pm, duck and cover for four minutes and thirty-eight seconds in honor of the Good Friday earthquake of 1964 and the 139 souls that perished between here and Northern California as a result. If you lived through the 9.2 earthquake, you qualify as a sourdough, even if you’re in Palm Springs. If you’re in Valdez today, join the remembrance on the Kelsey Dock at 5:30 pm.

TSUNAMI DRILL: Not shaken by all the Great Alaska Earthquake coverage? You have another chance on Wednesday. The National Weather Service, Alaska broadcasters, and Alaska Division of Homeland Security will test the Alaska tsunami warning system at 10:15 am. NOAA wrote: “During this test the Emergency Alert System and NOAA Weather Radio will be activated for portions of the State. During the test you may hear sirens, or hear or see a message that a tsunami warning has been issued. This will only be a test. The test will be canceled in the event of a real tsunami.” We’re hoping for no cancellation of the test.

TIME MANAGEMENT: In Southcentral Alaska, the sun rose at 7:37 am and sets at tonight 8:33 pm. Tomorrow we’ll have 13 hours of daylight. In Prudhoe Bay, they’ll hit 14 hours of daylight on Friday.

SEWARD’S DAY: Abraham Lincoln’s most trusted adviser was William Seward, but he was controversial in his day, so could he have been the Stephen Bannon of the Lincoln presidency?

Seward was a driving force behind emancipation of slaves and the purchase of Alaska from Russia. He once sold a plot of land to abolitionist Harriet Tubman (illegally) and he attended her wedding, remaining friends with her until his dying day. He lost the nomination for president because of his anti-slavery rhetoric.

He also had political enemies galore, including one who stabbed him in the face. And you thought the 2016 political season was rough. Say what you will about whether Russia had the right to sell Alaska, but Seward was a rock star before rock stars were invented.

JUNEAU GOLD MEDAL HISTORY BOOKS: The adult-league basketball championship in Southeast Alaska had a historic finish in the C bracket with Klukwan beating the Juneau James Gang, with — count ’em — three OTs, 107-91, the lo-o-o-ngest game in the tournament’s 71-year history. Haines schooled Hoonah 79-73 in OT for the B bracket. In the Masters bracket, Hoonah slid by Kake 80-78. Women: Haines over Hoonah, 52-30. Thanks, Juneau Lion’s Club, for another great tournament.

CHARLO AT 420: Charlo Greene, the Alaska-based TV reporter who famously resigned from KTVA on air by saying “F&@k it, I quit” now hosts a show about marijuana in Los Angeles, and is covering such topics as “cannasexual,” (benefits of combining marijuana and sex), How to Survive a Police Invasion, Sushi and Doobie Rolling Lesson, and Cannabis and PTSD. Those are some of the highlights, LA Weekly says.

Newest tax plan, HB 115 — you’re going to need an accountant

Suzanne Downing

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March 27, 2017

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Gov. Bill Walker and First Lady Donna Walker host an event for the Alaska Historical Society at the Governor’s Mansion last week. His Department of Revenue has worked up a new personal income tax, which has been incorporated into HB 115.

A new state income was plopped on the desks of members of the House Finance Committee last week, and it’s a dizzying restructure of what was being considered just two weeks ago. And completely different from one year ago.

If you use TurboTax to complete your yearly exercise in federal taking, you’ll probably need to hire a CPA to do your state taxes.

The new plan strips out the previous language in House Bill 115, which had proposed a flat-percentage income tax. It replaces it with language from Gov. Bill Walker through his Department of Revenue. Now, the tax proposal looks eerily like tax brackets from the Internal Revenue Service, but with rather leaner deductibles.

The new plan offered by tax promoter Rep. Paul Seaton, House Finance co-chair, is intended to disconnect the governor’s proposed income tax from the federal income tax, if federal taxes are reduced under President Donald Trump.

Judging from the complexity of these Seaton-Walker taxes, the “new, improved” HB 115 is a blueprint that has been on the design table for a while.

Insiders in Juneau say the governor has had an income tax proposal “in his back pocket” to be rolled out at the right time this session. But few thought he would do it surreptitiously through the Democrat House majority’s existing tax bill, rather than running his bill through the Rules Committee, which is the usual way for governor-sponsored legislation.

It’s a stunning (or cynical) reversal for the governor who, in October, 2014, told the Alaska Dispatch News: “I have no intention to implement a statewide tax or paying for state government by reducing Permanent Fund dividend checks. If we properly develop our natural resources and put in place a sustainable budget that should not be necessary.”

But putting in place a sustainable budget and developing our natural resources has fallen by the wayside. Now it’s all about taxes, as last year’s proposals revealed, which are getting more severe by the day.

And it’s becoming a familiar pattern: The tax hasn’t even passed and already it’s going up.

Unfortunately for Gov. Walker, Alaskans are not on board with an income tax. Not at all. A recent poll by Dittman Research of more than 800 Alaskans found that 58 percent of them oppose a state income tax, as shown by this slide given to Must Read Alaska by the Alaska Chamber of Commerce:

*A recent Dittman Research poll shows Alaskans’ attitudes toward sales tax, other taxes, and using some of the Permanent Fund earnings to pay for State programs.*

The governor’s newest tax plan leaves no taxable dollar untouched. It levies Alaskans at various rates, depending on their income. It’s also comprehensive, taxing everything from personal income, capital gains, pensions, estates, and different types of corporations. If it’s not nailed down, HB115 taxes it.

Must Read Alaska wrote about the new HB 115 on Friday, and promised readers we’d delve into it deeper. For those interested in learning more, the link to HB 115, with plenty of supporting material under the document tab, is here. And there will be hearings this week, starting today (Monday, March 27) at 1:30 pm. Hearings can be usually viewed on 360north.org

HERE ARE YOUR BRACKETS

If you are a wage earner in Alaska, get ready for steep progressivity. The governor’s income tax would have tax brackets similar to federal income tax brackets – except without the deductions.

The basic brackets for single and married, without children:

It gets more complicated once you have children, especially if they receive a Permanent Fund Dividend. The more you earn, the higher your tax. .

If you sell your home, you’d be taxed by the state on any capital gains, (unless you buy a house of greater value).
The Pick.Click.Give donation you just made? Not deductible on your state taxes.
The mortgage interest you pay every month? No deduction.
Do you get a State of Alaska pension (Tier 1-3)? You get a 10 percent cost of living allowance on the one hand, but will pay much more back to the state from the other hand.
Do you have income from a trust or estate? All taxable like regular income.
Are you on a fixed income? The State of Alaska will “fix” it lower for you.
Do you have short-term or long-term income? The State of Alaska would consider both the same as regular income.

Last year, the governor’s tax plan was also far reaching, but quite different from his new proposed brackets, which is going to hit resource workers, doctors, lawyers, electricians, and many fishermen hard. In other words, anyone who has any success, financially. Even a modest amount.

This year’s tax proposal can’t be compared line by line with last year’s, however. Walker’s 2016 income tax plan was 6 percent of what Alaskans pay the IRS. Simple. Straightforward.

An Alaskan who owed $10,000 in federal taxes would have owed the State of Alaska $600, under that plan. Walker also in 2016 proposed tax hikes on alcohol and tobacco, fuel, fishing, mining, energy, and tourists.

This year, Alaskans making over $100,000 a year would have to pay the State $6,000, regardless of what they pay the IRS. In other words, important deductions under the federal code don’t work inside Alaska, as envisioned by the Walker Administration and his allies in the State House.

Rep. Seaton, a state income tax true believer from Homer, has been working with the Department of Revenue. By introducing the governor’s language, he’s making sure that people in his home town, where the median household income is $54,778, will pay at least $1,000 a year to the State. And more, in many many cases.

The Seaton-Walker plan is projected to bring in $657 million. But can it be managed by the Department of Revenue with only 60 Revenue Department workers? That’s the number of new employees the original HB 115 had projected, but this tax plan may require more auditors, due to its complexity. There was no fiscal note attached to the new bill.

Hearings on HB 115 will continue throughout the week. Public testimony on this plan begins Wednesday, and Alaskans with an opinion can head to their nearest Legislative Information Office. The limit on citizen testimony is two minutes.

Governor strikes a defensive posture on Klutina access

Suzanne Downing

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March 25, 2017

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WHAT DID WALKER AGREE TO? Gov. Bill Walker this week finally spoke to an issue that has driven a wedge between him and an important base of support — fishers and hunters concerned about him giving away public access to Alaska lands.

After weeks of refusing to reveal details about a settlement on a key land access lawsuit, Walker is coming forward with details about a secret negotiation that is occurring between his Administration and Ahtna, Inc.

In doing so, the governor has also guaranteed Alaskans will have the ability to comment on the settlement — he has simply not said if the public comment period is before or after the deal is closed.

Must Read Alaska has learned from inside sources that the settlement does not match the language in the governor’s press release describing it.

“Recently, there has been a push to have the State cancel these settlement negotiations and go straight to trial. Because of the large amount of misinformation fueling this push, the State wants to correct the record now,” Walker said in a March 21 news release that shows his team is on the ropes on the issue.

In the release, the governor defended the out-of-court settlement that relates to what’s known as RS 2477 historic trails, specifically one that gives the public access to the Klutina Lake and state lands across land owned by the Ahtna Corporation. Klutina Lake is a popular salmon fishing spot for Alaskans across a wide swath of the state’s midsection.

The governor’s attorney general, Jahna Lindemuth, began closed-door negotiations with Ahtna to reduce the “gold standard right-of-way” of RS 2477 status to a lesser, 17(b) status, in order to resolve a lawsuit filed by Ahtna in 2009. Ahtna wants to limit access.

As the Alaska Department of Law has written, “Ahtna, Inc., the landowner whose lands are traversed by the Klutina Lake road, claims that travelers may use the road only for continuous travel. According to Ahtna, the traveling public may not make rest stops, park for any purpose within the right-of- way except for emergencies, or camp overnight within the right-of-way.”

This is in violation of RS 2477.

AHTNA HELPED WALKER’S ELECTION

Political observers will recall that Ahtna participated in a political action committee formed by Anchorage attorney Marcia Davis during the 2014 election cycle to oppose former Gov. Sean Parnell after his administration took a stand in favor of public access. The group was called “Your Future Alaska.”

Ahtna played an important role in getting Gov. Walker elected with its work with Your Future Alaska, and Davis and other organizers of the PAC eventually paid fines for concealing the source of their group’s funding, by laundering it through a nonprofit they formed. Ahtna contributed $5,000 to that group to defeat Parnell. Davis, the key person behind the group, became Walker’s Deputy Chief of Staff.

Now, the governor is making sure Ahtna wins against the State.

“The State of Alaska and Ahtna, Inc. have been engaged in settlement discussions regarding the Klutina Lake Road near Copper Center. Ahtna sued the State in 2008 alleging trespass and the State counterclaimed to have the Court decide the existence and scope of the right-of-way. Before starting a long and contentious trial, the State and Ahtna decided to see if they could settle the case. Recently, there has been a push to have the State cancel these settlement negotiations and go straight to trial. Because of the large amount of misinformation fueling this push, the State wants to correct the record now,” Walker’s statement said.

Ahtna also issued a press release in the past 10 days:

“No part of the settlement framework would deny the public the convenient access it has enjoyed to Klutina River, Klutina Lake, and nearby State land that is accessed over Ahtna’s property. Indeed, Ahtna and the State could not agree to any such limitation without the participation of the Federal Bureau of Land Management, which has not been a party to the negotiation. The settlement would certainly not cut off access over State land, but the settlement would require recognition by the public that the desires of the majority for convenient access are not superior to the rights of property owners to control the use of their land,” Ahtna says in its release.

The Native corporation also said that it permits recreational sue on Ahtna lands for fees no higher than what is charged by the State of Alaska.

“While the State of Alaska and Ahtna have had disagreements about the specific nature and scope of easements on the Klutina Lake Road, the parties have always agreed that the public should have access to the area. Ahtna is optimistic that the settlement is part of a collaborative and cooperative spirit that will benefit its shareholders, the general public, and the State of Alaska,” the statement continues. Beyond that, however, the press release said: “Ahtna is not available for any further comment on this matter until the settlement is finalized.”

Attorney General Lindemuth would not discuss the negotiation during her confirmation hearings in the Senate earlier this month. She would only say she hoped it would be a win-win for the State and the corporation. Her confirmation was quickly set aside after Senate President Pete Kelly told her he wanted her to fight to win — not win-win.

[Senator says he wants AG to fight to win]

With public pressure increasing and his attorney general not making headway in her confirmation, Walker said these conditions will be met by the negotiation:

The State will secure a 100-foot right-of-way from the New Richardson Highway to Klutina Lake.
The State will secure a road easement to access State lands from the end of the existing road; the parties will seek termination of a narrower 17(b) trail easement that follows a similar route.
Multiple areas along Klutina Lake Road will be designated where the public can fish and launch boats into the river. Areas will be provided for camping and overnight parking and any fee Ahtna charges must be reasonable and similar to fees charged in State campgrounds.
The governor in the release promises that there will be an opportunity for public comment, although he stated it is not required.
If an agreement is not reached by the end of May and the parties are not making reasonable progress on the details of a final settlement, new trial dates will be scheduled with the superior court.
The State says settlement will not foreclose any future actions by the State to assert its rights over other rights-of-way under RS 2477
The governor insists that any settlement of this case will relate only to Ahtna, not to like cases in the future.

On Feb. 27, Alaska Superior Court issued an Order granting a stay that was jointly requested February 24 by Ahtna and State of Alaska, which said the two parties had arrived at a tentative settlement, which would make the April 24 trial date unnecessary.

Must Read Alaska has learned that Ahtna has agreed to the final settlement, the details of which have yet to be disclosed.

Walker rolls over on access to Klutina Lake fishing grounds

Uber gets a Lyft as ride-sharing passes Senate

Suzanne Downing

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March 24, 2017

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*Senator Berta Gardner, D-Anchorage argues against allowing Uber and Lyft companies to operate in Alaska, while members of her Democrat caucus, Tom Begich, Bill Wielechowski, and Dennis Egan, listen.*

Ride-sharing companies such as Uber and Lyft got the green light by the Alaska Senate, which voted to pass Senate Bill 14, allowing Alaskans to use their cell phones to connect themselves with for-hire drivers in what’s known as the “access economy.”

The Senate vote was along party lines: Republicans favored it and Democrats voted against it, 14-5. Sen. Bert Stedman, R-Sitka, was the only Republican senator who voted against it.

Sponsored by Sen. Mia Costello, R-Anchorage, the bill endured lengthy floor objections by Sens. Bill Wielechowski, Dennis Egan, Berta Gardner, and Tom Begich. Wielechowski, Begich and Gardner are all part of a newly formed “Innovation Caucus” that was announced earlier in the week.

“Personally I like transportation network services,” argued Sen. Dennis Egan. “The problem is they don’t fit here. I’ve used them Outside. And I hope they come to Alaska someday.” And then he went on to say why they were a bad idea because local municipalities should have control.

Most of the amendments were “poison pill” amendments, and the majority of those were offered and argued by Wielechowski, a union lawyer for IBEW 1547. But two amendments passed, preventing drivers who have been convicted of a felony or some moving vehicle violations, as well as those on the national sex offender registry. Both required amendments to amendments to make them work, due to a drafting error by Legislative Legal Affairs.

Unions have made their displeasure known in Juneau on the ride-sharing bill. The Teamsters flew a union representative in from Seattle to testify during the House hearings on the companion bill, HB 132, which was heard in House Labor and Commerce Committee last week.

Vince Beltrami and Joelle Hall, president and director of operations for the Alaska AFL-CIO have been spotted in the Capitol this week, to talk with lawmakers, and Teamsters are hosting an invitation only birthday party for a key legislator this weekend.

[Bring on ride-sharing services in Alaska.]

The House version was heard and held in House Labor and Commerce Committee and will be taken up today at 3:15 pm., where poison pill amendments by Rep. Andy Josephson, D-Anchorage will be heard.

Governor’s ‘Pomp Tax Plan’ author hasn’t been made available for questions

And the author of the governor’s income tax is…Dr. Richard Pomp

Who wrote Governor Walker’s new tax plan?

ITEP advocates tax policies that suppress economic growth in favor of income redistribution.

ITEP recommends that state and local governments rely on unstable sources of revenue.

Alaska Chamber launches campaign against income tax

Gasline anchor tenant signs ‘Dear John’ letter to Walker

Bright, shiny objects: Seward’s Day, Earthquake Day, Charlo Greene

Newest tax plan, HB 115 — you’re going to need an accountant

Governor strikes a defensive posture on Klutina access

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