Page 1639 – Must Read Alaska

Pebble, EPA delay court date – again

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May 5, 2017

Pebble vs. EPA may not end up in court. The mining company and the federal agency that has thwarted it are working on a settlement, which could be just days away.

Northern Dynasty, parent company of the Pebble Partnership, and the Environmental Protection Agency on Thursday filed a joint motion in federal court to delay the court date for the company’s lawsuit against the agency over regulatory actions that prevented the Pebble Project from advancing to a permit application.

Pebble has accused the agency of whitewashing its misconduct and that of its senior officials. In 2016, Pebble called the EPA Inspector General’s report on that misconduct an “embarrassing failure on its part to understand what several congressional committees, an independent federal judge in Alaska, and an independent review by a former Senator and cabinet secretary have already found – that EPA acted improperly with regard to Pebble and was biased in its actions. We expect Congress will continue its investigation into the breadth of misconduct we have uncovered through the limited information that has been made publicly available.”

Many Alaskans are uncomfortable with the project, which they fear could hurt a valuable fishery in Bristol Bay. But they’re even more uncomfortable that the federal government agency may have overreached and run roughshod over the law to prevent a company from using the permit application process legally afforded to it.

The EPA used a preemptive “veto” under Section 404(c) of the Clean Water Act, blocking the region from development in order to prevent “an unacceptable adverse effect on… water supplies… and fishery areas.” It was highly unusual.

Considered controversial by any measure in Alaska, the mine proposal has galvanized a broad coalition of opposition, including environmentalists, Alaska Native groups, and commercial fishermen.

Today’s request extends the court date one week, and indicates the two parties are close to settling the complaint that the Pebble Limited Partnership has against the EPA.

The developer of the proposed copper and gold mine have already asked for previous delays of what would be a widely covered court battle, one that would be heavily publicized by environmental organizations.

Today’s motion states that the parties have identified a framework for settlement and need another week to finalize the agreement. That puts an agreement at or before May 11.

Pebble Partnership CEO Tom Collier said today: “A great deal of common ground has been established between the parties, including on the importance of upholding the rule of law when it comes to administering statutorily mandated processes under the Clean Water Act, the National Environmental Policy Act and other federal statutes. On that basis, we anticipate achieving a resolution to these matters next week.”

Northern Dynasty is based in Vancouver, Canada and its principal work is Pebble.

We answer Nat’s pre-slap question: Was it reasonable? Was it fair?

Suzanne Downing

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May 4, 2017

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By now, the Capitol rumor mill has moved on. Mostly.

But Wednesday morning, about the time Alaska Dispatch News reporter Nat Herz was filing his news story about being slapped by Sen. David Wilson of Wasilla, the text “dings” were burning up phones: Did you hear Wilson had hit Nat in the hallway of the Capitol?

The jokes were running along the lines of, “Well, who among us hasn’t wanted to do that?” And the memes, like this one, began flying between legislative staffers.

The ostensibly “playful” incident (Wilson’s word) was an answer to Herz’s hallway accostment of Wilson, with tape rolling. He wanted to know whether Wilson thought a negative story that Herz had written for the Alaska Dispatch News met with his approval.

Herz was asking the senator: Was that reasonable? Fair?

FAIR OR A HIT JOB?

Herz had written that Wilson filed legislation that would cut funding to some social service nonprofits in the Mat-Su Valley, but would not hurt the agency where Wilson was most recently employed.

The Sunday headline gave the bias away: “Wasilla senator who worked for social service agency proposes to revoke grants for others.”

Senate Bill 90 would end the Human Services Community Matching Grant program of the Department of Health and Social Services. It’s a small grant program that goes to municipalities and boroughs with a population of 65,000, and then local nonprofit agencies can apply for them locally. There’s nothing in the bill that singles out any specific agency nor exempts Wilson’s former employer from cuts.

In fact, Wilson’s former employer, Alaska Family Services, has received these grants from time to time and would conceivably be affected.

Wilson has had issues with the accountability of the grant program. No one goes back to see if the grants are being used effectively, or for the purpose for which they’ve been granted, he’s said. Wilson, having worked in social services, knows a thing or two about how grants get used.

Three communities get these grants: the Municipality of Anchorage, Fairbanks North Star Borough, and the Matanuska Susitna Borough. These communities must provide a match to the nonprofits that win the grants, which are meant for soup kitchens, homeless shelters, day shelters, food pantries, and distribution centers for clothing and sleeping bags for the very poor.

According to Herz’ story, the reporter found the bill had “the notable exception of the agency where Wilson worked through the end of last year.”

Was use of the words “notable exception” fair, or did it show bias?

Alaska Family Services, with a budget of $7 million plus, provides wrap-around services, including alcohol and substance abuse screening, case management, behavioral health, psychiatric and substance abuse help, child care, sexual assault care, domestic violence shelter, and family violence prevention programs, and supervised visitation in coordination with the Office of Children’s Services. It gets grants from multiple sources, including state, federal and individual donations. The agency is working toward growing its own endowment so it can move away from public funds in the future.

According to Herz’ story, “the bill has prompted questions because of its effect, and Wilson’s refusal to explain why he introduced it.”

Was “prompted questions” fair? Who is prompting the questions? The writer didn’t say if he was wondering aloud or if someone else had called him….someone who didn’t like the bill, for example.

At a time when the House Democrat-led majority is trying to impose a massive income tax (and a beer tax) on the Alaska workforce, other lawmakers, like Wilson, are proposing budget cuts. Senate Bill 90 is a $1.5 million cut to the $4.1 billion state budget.

Perhaps Wilson didn’t feel he needed to explain it to Herz, which “prompts” the question: Is a reporter entitled to an answer?

Herz’s story went on: “But he [Wilson] wouldn’t give an explanation for why he’s proposing to eliminate the grant program — saying that one would emerge when and if his bill gets its first hearing.”

“There hasn’t been a bill hearing,” Wilson said to Herz. “Thus the bill should stand for itself.”

The answer is not a refusal, per se, but is a brush off, to be sure.

Herz continues in his story to raise the “prompted questions” — a reporter’s way of saying he has an angle:

“SB 90 isn’t the first action by Wilson as an elected official that’s raised questions about his relationship with Alaska Family Services, where he was director of a domestic violence and sexual assault program, supervising outreach efforts and an emergency shelter.

“But Wilson’s employer through his election, the nonprofit Alaska Family Services, wasn’t among the 11 organizations that received the most recent round of grants.”

Yes, they don’t really apply for a lot of these particular grants to begin with. These are small grants.

“The group didn’t apply for this year’s grant. It got about $10,000 for a tobacco control program in 2015 and 2016.

“But separate requests for $35,000 in 2014 and $30,000 in 2015 — to support a shuttle service to drive clients to appointments — were rejected.”

Was that fair reporting?

Is Herz implying that because the agency didn’t get a couple of grants in 2014 and 2015 that somehow Wilson is committing an act of retribution with SB 90?

Herz goes on to say that “Mat-Su elected leaders and nonprofits appear to be uniformly against Wilson’s proposal.”

Is that characterization of “appear to be” fair reporting? It’s a lot like asking a kid if he is in favor of having his allowance reduced. Of course local leaders don’t want to see State money cut. Or do they? After all, with the state money, the local governments need to cough up a matching grant, so there are costs to receiving that money.

One person quoted by Herz is Michelle Overstreet, the founder and director of My House, a well-regarded agency that might see funding reduced if the grant program goes away. She said, “It’s hard to imagine that there isn’t an ulterior motive for cutting funding that wouldn’t benefit an organization that he’s championing the cause for. It doesn’t make any sense.”

Herz continues on the theme that since Wilson used to work at Alaska Family Services, Wilson has played favorites with the agency, even when he was on the Wasilla City Council — allegations that Wilson says are simply not true.

Wilson told Must Read Alaska he doesn’t have a hard time with two-thirds of Herz’ story, but says there was heavy cherry-picking of information that made one-third of the story simply incorrect.

The Sunday story about Wilson’s bill “prompts” another question: Was Herz used by some sources to get back at Wilson, because he’s been asking for accountability in the HSS grant program?

“I didn’t really mind the story,” Wilson said this morning, in a telephone conversation with MRAK. “Everyone has a job to do, and he’s (Nat’s) going to do his job and I’ve got mine to do.”

None of the above facts and prompted questions are meant to condone a physical slap in the face. But they do go a long way toward explaining the level of frustration Sen. Wilson was probably feeling at the time.

[Read: Media-Lawmaker relations: A slap in the face?]

Lawmaker-reporter relations: A slap in the face?

Suzanne Downing

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May 4, 2017

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ROUGH TIMES IN THE CAPITOL

In Washington, D.C., the White House Press Corps is famously at odds with President Donald Trump and his staff. But so far, at least, no one has reported any physical confrontations. Some measure of decorum has prevailed.

But that can no longer be said about Our Fair Capitol in Juneau. Today, tensions between the media and one conservative lawmaker boiled over.

Alaska Dispatch News reporter Nat Herz reported to Juneau police that he was slapped by Sen. David Wilson, R-Wasilla, in the Capitol building on Tuesday.

The police report records it as “harassment”. The slap, offensive as it may have been, may not have risen to the level of assault, since no physical injury was evident.

The ADN political reporter said the exchange between him and freshman Sen. Wilson occurred on the ground floor of the Capitol. Herz was recording the conversation.

On the recording it sounds like a blow comes in response to Herz’ question about whether Wilson thought a recent story he had written was fair and reasonable. The slap was Wilson’s apparent answer.

Herz returned Must Read Alaska’s phone call and said he didn’t want to make a statement, that he had work to do and wanted to get working on a different topic.

The Alaska Senate Majority Press Office issued this statement: “The Senate expects professional conduct and decorum from all members. Until all the facts surrounding the situation described are available, we have no further comment.”

The last time a reporter was roughed up by a politician in Alaska may have been in 2010 when Senate candidate Joe Miller’s bodyguards handcuffed Tony Hopfinger of the old Alaska Dispatch, when Hopfinger tried to interview Miller in the hallway of Central Middle School.

Granted, many Wasillans would be more likely to punch than slap a person, if sufficiently irate. But for Herz, that observation may not have taken the sting out of the blow.

Seaton moves to triple taxes on craft beer

Suzanne Downing

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May 3, 2017

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Seaton moves to triple taxes on craft beer

FIRST THEY CAME AFTER OIL BARRELS, NOW IT’S BEER BARRELS

Look out, craft brewers. The Alaska House of Representatives is about to skim some foam off your profits.

Since 2002, Alaska’s micro-breweries have gotten a tax break from the State of Alaska to help jump-start an industry that in Alaska had lagged behind other states. The State has incentived other industries, such as oil and gas, and this is not dissimilar.

The craft brewers pay one one third of the taxes that are levied on beer coming from large manufacturers out of state.

With the tax breaks, craft beer makers flourished, bringing skilled employment and manufacturing to a state that sorely needs private sector manufacturing jobs.

The sector has grown to 39 microbrewers around the state, even in such unlikely places as Hoonah, Gakona, and Fox.

But the tax breaks enjoyed by craft brewers are threatened.

What is now 35 cents on a gallon of beer could more than triple to $1.07, if Rep. Paul Seaton of Homer has his way.

Seaton, who is chair of House Finance, requested that the Labor and Commerce Committee consider legislation to repeal the reduced tax rate, which applies to the first 60,000 barrels of beer sold by craft brewers.

That Labor and Commerce hearing is today at 3:15 pm at the State Capitol.

The additional revenue to the state would be $2.6 million, Seaton argues.

“Amending and updating this statute would create a level playing field for the alcohol industry,” Seaton said in his memo to the committee. By doing so, it would help out-of-state brewers better compete with in-state Alaska brewers.

But craft brewers disagree. They don’t have the economies of scale like large industrial brewers do. A tripling of state taxes will affect their business decisions and curtail growth.

“In Alaska, we already have alcohol laws that are large barriers to entry for small breweries,” said one craft brewer who asked to remain anonymous. “Craft brewers around the country make money off of tap rooms because distribution is really expensive for those without the large volumes. Here in Alaska, distribution for a small brewer is all but impossible because of our distances and costs, but if you triple the tax, it’s going to be impossible to make the bottom line turn black. Our state laws already make it hard just to operate tap rooms.”

Apparently, in the House Majority organization, “if it moves, tax it,” continues to be the guiding principle.

Craft brewers in Alaska — all of whom would be impacted by Seaton’s requested bill — include these:

49th State Brewing Company – Healy
Alaskan Brewing Company – Juneau
Anchorage Brewing Company – Anchorage
Arkose Brewery– Palmer
Baranof Island Brewing Company – Sitka
Bearpaw River Brewing Company – Wasilla
Bleeding Heart Brewery – Palmer
Broken Tooth Brewing – Anchorage
Denali Brewing Company – Talkeetna
Devil’s Club Brewing Company – Juneau
Gakona Brewery & Supply Company – Gakona
Gold Rush Brewery – Skagway
Glacier Brewhouse – Anchorage
Grace Ridge Brewing – Homer
Haines Brewing Company – Haines
Homer Brewing Company – Homer
HooDoo Brewing Company – Fairbanks
Icy Strait Brewing – Hoonah
Kassik’s Kenai Brew Stop – Nikiski
Kenai River Brewing Company – Soldotna
King Street Brewing Company – Anchorage
Kodiak Island Brewing Company – Kodiak
Last Frontier Brewing Company – Wasilla
Midnight Sun Brewing Company – Anchorage
Odd Man Rush Brewing – Eagle River
Resolution Brewing Company – Anchorage
Seward Brewing Company – Seward
Silver Gulch Brewing & Bottling Company – Fox
Skagway Brewing Company – Skagway
St. Elias Brewing Company – Soldotna
Cynosure Brewing – Anchorage

Petitioners now ‘lawyered up’ in Homer council member recall case

Suzanne Downing

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May 3, 2017

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*Donna Aderhold, Catriona Reynolds and David Lewis are the three Homer City Council members that face recall.*

Last week, three Homer city council members, with the ACLU representing them, filed a lawsuit to stop the recall election that had been certified to go forward for June 13.

Now, the petitioners — Heartbeat of Homer — who want to hold a recall election have gotten legal representation. Attorney Stacey Stone of Holmes Weddle and Barcott filed a motion to intervene in the case, and she’s tasked with making the case to the judge that the people of Homer should be allowed to vote.

The ACLU is asserting that the people of Homer should not be allowed to vote in the special election that was approved by the city clerk.

Petitioners, on the other hand, have a bone to pick with the city attorney, Holly Wells, who seemed to be taking the side of the council members and against the petitioners.

The opposition to the motion to intervene needed to be filed by today, May 2 at 4:3 pm, and no apparent action was taken by the ACLU.

The case now awaits assignment to a judge.

Three city council members in Homer have been subject to a recall after they worked behind the scenes to have Homer designated a sanctuary city.

Ultimately the controversy that ensued led to a watered down “inclusivity” ordinance. But their credibility had already come into question over a series of emails between them that had “sanctuary” throughout them. A group of Homer residents got ahold of the emails through a public records request, and scoured them, then publicized them. The three council members faced a scorching rebuke from many Homer residents who felt they were working against the well-being of the city.

Petitions were completed with plenty of signatures to spare, and were turned into the city clerk at the end of March to recall Donna Aderhold, Catriona Reynolds and David Lewis.

The ACLU says the recall violates the council members’ First Amendment rights. But the petitioners say that voters are entitled to recall their governors for a broad variety of reasons, and that the law favors them.

[Read: Smoking gun: City council members intended to create sanctuary city]

[Read: Homer petitioners reach recall milestone.]

Breaking: ACLU, council members sue Homer over recall election

Past commissioners say Trooper morale low, but they can’t arrest Governor’s attention

Suzanne Downing

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May 2, 2017

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A group of 14 retired Public Safety commissioners, deputy commissioners, and other retired officers are concerned that morale among Alaska State Troopers is alarmingly low.

They’re so concerned that they’ve sent a letter about it to Gov. Bill Walker saying morale is at an all-time low. And they should know: Combined, they represent over 160 years of public safety experience.

The men copied the letter to the governor’s Chief of Staff Scott Kendall and the Director of the Office of Management and Budget Pat Pitney, as well as Darwin Peterson, the governor’s legislative director.

Three weeks later, and they’ve received no response. Only the sound of crickets.

The letter, sent to Must Read Alaska this morning, was respectful: “As veterans with decades of experience, we’re familiar with the budget process, ebb and flow of the State’s economy, and public attitude when it comes to comprehensive, effective law enforcement. What we are finding with family, neighbors, friends and the general public is a confusion and questioning why DPS and AST personnel are either stagnate in growth, or steadily in decline.

“Recall in your defeat of incumbent Governor Parnell, a core message you promoted was determination to fiercely protect the DPS budget while expanding statewide coverage and enhancing State Trooper hire and retention. Unfortunately, that has not happened. The public, whether or not they support your current fiscal plan and new tax recommendations, are nearly uniform in support of more Troopers.”

The letter states that “morale is at an all-time low. Low morale affects service, competence and continues to permeate into detachments regionally, at a systemic degree.”

The retired law enforcement leaders request that the governor hire more Alaska State Troopers, but that he also publicly show his support for the men and women in the Department of Public Safety.

The letter is signed by eight former commissioners — Joe Masters, Bill Tandeske, Ron Otte, Gary Folger, Richard Burton, Arthur English, Del Smith, and Pat Wellington.

Other signatories include retired Deputy Commissioners John Glass and James Vaden; Col. Joel Hard, Col. John Murphy, Scott Campbell, director of the North Slope Borough, and Chief Tom Clemons of the Seward Police Department. Retired Col. Tom Anderson, director of the Fraternal Order of Alaska State Troopers, also signed the letter.

Col. Anderson said they would only contact the governor if something was really wrong. Normally, Anderson spends his days supporting the efforts of the Fraternal Order of Alaska State Troopers, the Alaska Peace Officers Association, and the Alaska Chiefs of Police Association.

“It puts us in a bad spot because we don’t want to criticize. But a lot of the senior people in the department are on the verge of retiring, and the Troopers are losing good people. The issue of morale is more than just about the budget.”

Coincidentally, Gov. Walker announced today that President Donald Trump has appointed him to the 10-member Council of Governors, which focuses on military issues and defense spending.

“My administration’s top priority is to build a safer Alaska,” Governor Walker said in an ironic press release. “I am honored to accept this appointment. As the only independent governor in the nation, I intend to bring Alaska’s unique and important perspective to the issues that face our state and our nation. Given our strategic geographic location, it is crucial that our state participate in national defense conversations. This appointment will allow me to share Alaska’s story in a new way with the Trump Administration and the nation.”

But while national security is always a priority, it’s never been stated by this governor to be his top priority — until today.

The past commissioners of Public Safety are, it appears, trying to engage him on public safety where it counts most for Alaskans — at the State Trooper level.

Dodd-Frank reform: Why we should care about the lack of new banks

Suzanne Downing

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May 2, 2017

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When was the last time a new bank started in Alaska? About 17 years ago, when Northrim Bank opened its doors.

Yet there was a time when people got together, pooled their funds, and started a community bank. Now, an entire generation of Americans is growing up during a time when “no new banks” is the new normal.

In fact, there has been a sharp reduction in community banks. In 1990 the U.S. had more than 12,300 commercial banks in operation. But, by the end of 2016, eight years after the financial crisis of 2008, only 5,083 remained. And among those, a much larger percentage of total bank assets are concentrated in the nation’s five or so largest commercial banks.

More to the point, small businesses in the U.S. are having a far tougher time getting loans than they did pre-crisis. Yet small businesses remain the backbone of the U.S. economy. Ask a small business person if it’s harder to get a loan these days and they’ll tell you it’s a nightmare.

This drag on commerce in America is not the result of natural market forces — it is a direct outcome of the Dodd-Frank Wall Street Reform and Consumer Protection Act, whose 22,000 pages of regulation is smothering the lending sector. Banking has become forbiddingly restrictive under Dodd-Frank, with government regulators now having far more control over who qualifies for loans than they ever did, prior to the law’s passage.

Today, the House Committee on Financial Services began the mark up of the Financial CHOICE Act, which would replace Dodd-Frank. It is a Republican-led effort and it’s running into headwinds with Democrats, of course, who are defending Dodd-Frank as protection for consumers.

But it’s not protection. It’s hurting consumers.

“It has been almost seven years since the passage of the Dodd-Frank Act. We were told it would lift our economy, but instead we are stuck in the slowest, weakest, most tepid recovery in the history of the Republic,” said House Financial Services Chairman Jeb Hensarling, R-Texas, as he introduced the Financial CHOICE Act. He called Dodd-Frank a form of politicized lending.

Must Read Alaska spoke off the record with Alaska bankers who confirmed that it takes a lot longer for homeowners, consumers, and businesses to get loans these days. A home loan that used to take 30 days, now takes 45. And a commercial loan can take much longer.

In fact, for business loans, it’s now the federal government through Consumer Financial Protection Bureau and its suffocating web of regulations and overbearing bank examiners making de facto decisions on loans, not bankers.

“Consumers can’t get loans in anything that would be considered a respectable amount of time,” one Alaska banker told us. That means consumers stop trying to get loans. And that means consumers are not engaged in the economy.

This banker said his institution spends $1 million more a year just to comply with Dodd-Frank, and in the range of $2-3 million a year to comply with all federal regulations.

Rep. Hensarling also wants to dismantle the Consumer Financial Protection Bureau, which was the creation of Sen. Elizabeth Warren, when she was still a law professor at Harvard, at the direction of President Barack Obama.

The CFPB has become a policing agency, rather than a consumer protection agency, critics warn. Bankers have less and less control over who gets loans, and the federal government has increasing authority.

Hensarling described the CFPB as making rules that are unfair, deceptive, and abusive.

Rep. Maxine Waters, D-Calif., said Democrats will fight. “This bill must not become law. There is too much at stake for consumers and for our whole economy.” She called the bill “dead on arrival.”

Democrats are so fiercely fighting reform that today they are insisting the entire 500-page CHOICE Act be read into the record, word by word — a form of filibuster in committee. The reading of the bill started at roughly 8 am Alaska time and was continuing as of 10 am.

Tuesday’s hearing is the latest in a series of partisan battles on the Financial Services hearing over the future of Dodd-Frank.

What Rep. Waters and her ilk are actually fighting is stronger economic growth. Since the passage of Dodd-Frank, the U.S. economy has been “stuck in second gear,” with the weakest economic expansion since the 1930s.

That is not a coincidence.

If one needs confirmation of the stifling effects of Dodd-Frank, look no further than this: Since 2010, the U.S. has had only one new bank charter, an Amish bank in Pennsylvania — Bank of Bird-in-Hand, which started in 2013. Because, perhaps, only the Amish have the patience to deal with the federal government.

Hensarling’s bill would give regulatory relief for dozens of provisions now in Dodd-Frank, but although it’s likely to pass the House, it will face headwinds in the Senate.

Ironically, Wall Street bankers in the top tier have started to like Dodd-Frank, because it keeps the competition down, making the nation’s largest institutions more profitable.

In that sense, Dodd-Frank is a law that only the biggest banks (and economically illiterate Democrats) can love.

Walker Administration gearing up to arm investigators?

Suzanne Downing

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May 1, 2017

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The Walker Administration’s Department of Administration is engaged in a review of job classifications for state investigators, and may be on the verge of creating new categories of gun-toting special investigators throughout state agencies, according to a whistleblower who has asked for anonymity.

According to draft state plans provided to Must Read Alaska, these special investigators – from the Department of Commerce to the Department of Labor to the Permanent Fund Division – will be packing guns during their investigations of workplace safety, regulatory compliance, and eligibility for benefits.

The documents were first made public by talk show host Amy Demboski. A review of the investigator positions at the state reveal there may be more than 100 positions that, while not public safety positions, may soon be granted the power of arrest.

Proposed changes in classification structure include the creation of a Special Investigator II position. The draft changes state that:

“Special investigators are distinguished from other investigative classes by the authority and responsibility to make physical arrests, issue citations, serve arrest warrants, and carry a weapon in accordance with their Certificate of Commission as a Special Officer and agency policies and procedures.”

“Special Investigator I: performs a variety of criminal, civil, and administrative investigations, compliance, and enforcement duties and tasks where assignments range from monitoring licensure compliance and enforcing regulation to conducting complex criminal investigations involving Municipal, State, and/or Federal law enforcement officers,” one description reads.

According to the whistleblower, the study of state investigator positions and the recommendations being made create new middle management positions, including the class of investigators who carry guns.

Troopers and police officers, before they can carry guns, must attend academy at thousands of dollars of expense to the State. They also must wear bullet-proof vests and spend time practicing on targets. The additional duty of carrying a weapon also adds liability costs.

Investigators for the state have functioned for decades without weapons and arrest authority by design: If they need an officer with them, investigators call in the State Troopers.

Must Read Alaska had veterans of state service at senior levels review the documents. They determined they are legitimate and represent how the Department of Administration has traditionally gone about reclassifying jobs.

Income tax study answers the wrong questions, wrongly

Suzanne Downing

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May 1, 2017

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A TAX PLAN BERNIE SANDERS WOULD LOVE

By SCOTT HAWKINS, SENIOR CONTRIBUTOR

The Institute on Taxation and Economic Policy (ITEP) will be phoning into House Finance this week to present its recent study that favors a personal income tax.

There are other options for closing the state’s massive fiscal gap. But ITEP advocates for personal income taxes and aggressive income redistribution throughout the U.S., so their findings come as no surprise.

Readers of this blog may recall that ITEP worked with the Walker Administration in designing the income tax proposal in House Bill 115. They did it through their board member, Richard Pomp, a tax law professor.

Having helped design it, the group has now released a study that… wait for it, wait for it… finds that a personal income tax is the cat’s meow! Amazing. Who could have seen that coming?

As a fiscal policy guide, should Alaskans take this study seriously? Of course not. Here are just a few of the many reasons:

Objectivity (or lack thereof): ITEP is based in Washington DC and North Carolina. It has a poorly hidden agenda that advises all of its work, which is to institute income taxes throughout the land, the higher the better, the more aggressively redistributionist, the better. “Social justice” is the name of the game.

To advance this cause, ITEP uses a proprietary fiscal “model” that it designed.

Consider this: would a pro-income-tax group design a model that produced justification for anything but an income tax?

Relevance (or lack thereof): The ITEP study asks the wrong question. It asks, what is the “fairest” way for Alaska to raise $500 million from our general population?

What it does not ask is whether or not the money is even needed. For example, nowhere in the study does it entertain the idea of simply cutting $500 million from what is the largest per capita state budget in the nation.

In reality a combination of spending cuts, use of some Permanent Fund earnings and modest withdrawals from the state’s budget reserve funds would be adequate to fund state government at reasonable levels and Permanent Fund dividends at average historical amounts. This policy mix would effectively tide us over until several large oil discoveries on the North Slope are brought into production, thus postponing the need for broad-based taxes indefinitely.

Economic impacts: Sucking $500 million (or $700 million, as HB 115 is designed to do) of personal income out of the Alaska economy would have far-reaching and negative impacts. While the study touts the fact that higher-than-average earners would pay the most income tax, it neglects to point out that such earners provide a disproportionate amount of revenue for local shops, restaurants, service companies and nonprofit organizations.

With Alaska already mired in a deep recession, an income tax would hammer the private sector economy and result in widespread closings of small and medium-sized businesses. This double punch would be very likely to lengthen the current downturn by several years, driving down property values further.

Longer term, the negative impacts would be even greater. By punishing higher-than-average earners with progressively higher taxes, the incentive to work is diluted amongst the most economically productive segments of the workforce.

Further compounding the error, the amount of money available for new or expanded business investment is hard hit. The result would be lower long-term economic growth in Alaska. In fact, of all the fiscal options on the table, the disincentivizing, investment-squelching effects of a progressive personal income tax would do the greatest long-term damage to Alaska’s future prosperity.

PFDs as welfare checks: Alaskans have some deeply held feelings about the Alaska Permanent Fund and its dividend program, affectionately known as the PFD. Unique among the 50 states, it is Alaska citizens’ share of the state’s oil wealth. Our piece of the action. It was never designed nor imagined as a welfare program. Many if not most Alaskans would find that characterization offensive.

The analysts at ITEP feel differently. According to their analysis, the “fair” thing to do is tax Alaskans rather than cut dividends. In other words, by taxing people in order to have enough money to pay dividends, we are funding dividends from citizen tax dollars — taxing ourselves in order to pay ourselves. ITEP favors this because it redistributes income from higher earning families to lower earning families. But not only does this policy fail the common sense test, it casts the PFD in a whole new light – a light that long-time Alaskans will consider distasteful.

The PFD program would still be unique, all right, but in an entirely different way that would distinguish Alaska as having the most socialistic fiscal system in the United States.

Sen. Bernie Sanders and his Alaska supporters would approve.

The camel’s nose: The $500 million that ITEP evaluates or the $700 million that House Democrats propose will never be enough. It will only be a starting point, a way to get an enormous camel’s nose under tents inhabited by Alaskans. Over time, the income tax will only get higher, more steeply progressive, and with fewer and fewer Alaskan households footing the bulk of the bill, if history is any guide. (See discussion of economic impacts, above.)

While the Walker Administration and House Democrats strive mightily to use the fiscal gap as an excuse to levy a redistributionist income tax, clear thinking Alaskans should question the need for broad-based taxes, the heavy economic impacts of enacting one, and the very real danger of undermining the moral and fiscal legitimacy behind the PFD program.

Scott Hawkins is president and CEO of Advanced Supply Chain International. He was formerly a regional economist for an Alaska bank and the founding President of the Anchorage Economic Development Corporation. Currently, he is chairman of ProsperityAlaska.org, vice chair of the Alaska Council on Economic Education, and chairman of BIPAC, a national organization that promotes a healthy private sector.

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