SPECTRUM: Could selling state assets avoid or defer taxes?

Swallow a small tapeworm, and it will become a larger tapeworm.

That’s Grover Norquist’s warning about the new “head tax” proposed by Gov. Bill Walker in his call to bring the Alaska Legislature back to Juneau later this month.

We can no longer “kick the can” down the road, because we’re out of road. That’s one way to paraphrase Gov. Walker’s warning behind his call for a special session.

Norquist, one of the nation’s most influential conservatives, heads Americans for Tax Reform. He spoke with Commonwealth North’s fiscal study group, a week after Governor Walker, his chief of staff Scott Kendall, and Revenue Commissioner Sheldon Fisher Walker explained their plan to fill Alaska’s close to three-billion-dollar budget gap.

The Governor would close our deficit by sharing Permanent Fund revenues between government services and the dividend Alaskans get. He would levy a “head tax” on all employed and self-employed Alaskans for 1.5 percent of their wages, up to double the value of the dividend. Unspecified cuts to government services would make up the rest.

Fisher’s slide deck summarizing the numbers, with videos of both the Walker team and Norquist presentations, are posted at www.commonwealthnorth.org.

The “head tax,” also called an income tax by both Walker and Norquist, would raise $300 million annually. So far, the Governor’s proposal hasn’t garnered much appreciation in the State Senate which has held the line against new taxes. Behind his colorful analogy about tapeworms, Norquist’s arguments against the income tax had several parts: a small, temporary tax almost always becomes permanent, almost always becomes bigger. States without income taxes tend to have better economic growth than states that do.

The Americans for Tax Reform website favors consumption based taxes, like sales taxes, if any new taxes are levied at all. So far, no one has proposed a statewide sales tax and sharing that tax with our boroughs, cities and villages – many of whom already collect a sales tax.

Before any new taxes, Norquist counseled us, do an audit of state assets and see what can be sold, perhaps to replace the $300 million either a sales or income tax would bring.

That “sale of assets” concept hasn’t had much of a hearing so far, but it should. Pension funds around the world are starting to buy more government-built infrastructure, for example. They call it “recycling capital.” Finding the first couple of years of Alaska assets to sell might not be too hard.

Alaska has built billions of dollars of capital projects since oil started to flow through TAPS 40 years ago, some of which – like hydroelectric projects – are income producing. Water and sewer projects also collect revenue, and Norquist notes Europe is ahead of the US in privatizing these assets. The state owns a number of for-profit enterprises besides, like the Alaska Housing Finance Corporation, the Alaska Railroad, the Alaska Aerospace Development Corporation, and our international airports, some of which actually make a profit. For some of these enterprises, I’d be willing to trade my dividend to the State for shares in those companies – or invest directly.

Besides these assets, the state has vast acreage of land remaining from the 103 million acres acquired from the federal government after Statehood. While some of this land is parkland, some has been sold to Alaskans, transferred to municipalities, used for timber, mining, oil and gas, power and transport. But there’s a lot left. Some Alaskans, like me, might also be delighted to get vouchers for acreage someplace instead of a Permanent Fund dividend – and if enough of us feel that way, that money could balance the budget instead of a new tax.

Because our legislature is divided on approaches, the default has been to spend down our savings accounts – by $14 billion since this deficit situation started with the oil price fall in late 2014. But our short-term savings are running out. The more savings we use, the less we can count on income from that savings as part of the solution.

A survey around the table after the Walker and Norquist presentations tells me there’s not much hope for a successful special session. Few people expect agreement on a plan, but I wouldn’t give up so easily. A commitment to identify assets to sell could be the breakthrough that helps protect the dividend – and avoids or defers taxes, too.

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Mead Treadwell is President of Commonwealth North, a nonpartisan policy forum founded by Governors Bill Egan and Wally Hickel. He served as Lt. Governor of Alaska from 2010-2014. Commonwealth North’s fiscal policy study group meets Friday mornings, open to the public.