Taxes in Alaska?!

Alaska’s Legislature consists of three basic political factions, Republicans, Democrats and Bush.  Bush legislators, usually around 15% of the whole, can be either Democrats or Republicans.  But their party identification is essentially meaningless.  They are part of the Bush Caucus.  If given the choice, they will usually organize with the Democrats, most of whom believe, as they do, that the State of Alaska should spend a large part of its revenue on behalf of Alaska’s Natives, and the other residents of remote Alaska.  This is where the greatest need is, and where, over the years, a greater dependency on the State has developed.  But if the Democrats don’t treat them right, they’ll organize with the Republicans.  Most of them are DINO’s, Democrats In Name Only.  In 1982 DINO Al Adams led a legislative coup, installing Republican Minority Leader Joe Hayes as Speaker.  This political flexibility means they hit far above their weight.

For forty years the State has relied almost exclusively on revenue extracted from the oil industry.  But the Alyeska Pipeline now runs at 25% of capacity, the price of oil is far less than it once was, and, at least for the time  being, new fields are not coming on line nearly fast enough to refill the pipeline.

After the 2016 election, three moderate Republicans joined the Bush and the Democrats to form a majority coalition.  Its leader is Bryce Edgmon from a Bush district around Dillingham, who is the first Alaska Native Speaker of the House.  Part of the solution to Alaska’s fiscal woes the House Coalition and Independent Governor Bill Walker have devised is the renewal of the State income tax, repealed by initiative in 1980.

I once heard former Democratic Representative John Hellenthal describe how the original Alaska income tax was passed in the 1950’s, during territorial days.  All the legislators knew it had to be done.  Even as a Territory, they had to have revenue from somewhere.  But they also knew the voters who elected them would be furious.  As Helenthal put it, they all jumped off the cliff together.

Once the oil money started gushing into Juneau, an income tax was unnecessary, but the political powers in Juneau, led by a Bush Republican, Governor Jay Hammond, didn’t want to give it up.  If no one paid any taxes personally, then no one would care too much what was done with the oil money.  Hammond thought an income tax gave people a stake in government.  And he wanted to save as much oil money as possible in his Permanent Fund, where it could be used to benefit generations of Alaskans yet unborn.

Libertarian Representative Dick Randolph wasn’t buying it, and he, almost single-handedly, had the income tax repealed by initiative in 1980.  He even got the voters a refund of their 1979 income tax, which they’d already paid.  This made Libertarians quite popular for a time.

Elected Governor in 1986, Democrat Steve Cowper, at the beginning of the 1987 Legislative Session, went off somewhere for a long weekend and had an epiphany.  Either Alaskans had to give up their shiny new Permanent Fund Dividends, or we had to have an income tax.  I was the House Republican Minority Leader at the time, and I remember wondering if Cowper had been smoking some Matanuska Thunder—-.

We blew Cowper off, and as a result Alaskans haven’t paid a dime in income tax in 30 years.  All the while receiving nice fat annual dividend checks.  No wonder Republicans have been so popular in Alaska.

Periodic efforts have been made to reinstate the income tax, most notably by former Governor Hammond in 2004.  He made the same arguments he made against Dick Randolph in 1980.  Hammond may have been right is some cosmic sense, but an income tax in Alaska is a very hard sell.

And would it last?  Wouldn’t there be an initiative to repeal it, just as there was 37 years ago?  Maybe not.  Maybe times have changed, and Alaska is different now.  We may find out.





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