Sunday, September 18, 2016

Hammond On Income Tax Repeal: "Once repealed, we'll never get it back until we've raided all other revenue sources, and/or traumatically cut even crucial state programs."

Charles Wohlforth's column in the Alaska Dispatch News today is headlined,
"Permanent Fund hard-liners play chicken with Alaska's finances"
I realize that he probably didn't write the headline, but it does seem to reflect his point of view.  The third paragraph
"Our question is whether it is wise to pay out a dividend of more than $2,000 per person when our state government is going down the tubes. And a deeper question: Is paying dividends the only purpose of the Permanent Fund?"
But I'm also doing some marathon reading of Jay Hammond's Tales of Alaska's Bush Rat Governor
for Monday night's book club meeting.  (Yesterday's post looked at his take on how the all-Alaska pipeline instead of a Canadian line has cost the state billions.)

And I've just read the chapter (28) that focuses directly on the reasoning behind the Permanent Fund, the dividend, and the great mistake of repealing the income tax.

Really, if people want to get a sense of who has it right and whose policy stances are clouded by ideology or personal gain, it helps to look at what people said in the past and what they are saying now.  Of course, some folks today didn't say much in the past, but we can look at the people they hang with.

And we can reassess whether Wohlforth's article should be naming the Permanent Fund supporters as playing chicken OR the people who have consistently stopped the reinstatement of an income tax.  I'd also note that one of the three who filed suit, Clem Tillion, was a close ally of Jay Hammond during the Permanent Fund dividend battles.  He knows the history and I'm sure he knows Hammond's predictions.

The book was published in 1994 - so that's 22 years ago.  But in the context, it appears that these were his positions at the time - in the early 1980s, probably with some editing as the future got clearer.

The Permanent Fund dividend had been enacted.  But at the same time there was a push to eliminate the state income tax.  Hammond strongly opposed this.  He at least wanted it to stay on the books, even if it was greatly reduced, even to zero.
"I thought repeal was stupid.  Worse, I imprudently said so.  'Reduce it if you will;  suspend it if you must.  But for heaven's sake, don't repeal it or you'll cut the one string connecting the citizen's pocketbook to the government purse, and see state spending soar.  If people no longer feel it's their tax dollars 'those idiots in Juneau are spending,' a major restraint on government growth and spending will be lost.  Once repealed, we'll never get it back until we've raided all other revenue sources, and/or traumatically cut even crucial state programs.'" (pp. 264-65)
His income tax stance was opposed by many, including business leaders.
"I tried to convince these opponents how money paid out in dividends would glean far more collective benefits for Alaska businesses than would the same amount of money they'd save through tax repeal.
To make my case, I pointed out that, in the late 1970s, the income tax brought in about $200 million annually.  With repeal that $200 million benefit would not only go mostly to those who least needed it, but to nearly one quarter of Alaska's work force who were non-residents.  By contrast, $200 million in dividend payments would enrich each of our 500,000 residents - and only Alaskans - by $400 each.
One would think that Alaska business, as the prime beneficiaries of dividend spending would be the first to register preference for the dividend program over tax repeal.  Instead, they scoffed at the former while salivating over the latter.  Of course, the degree of enthusiasm for tax repeal was directly proportionate to one's income level." (p. 265)

And he has a lot to say about why the Permanent Fund wasn't welfare.

Why it isn't welfare?
"'First,' I responded [to an NPR reporter who asked if Alaskans weren't embarrassed by free money from this 'oddball' program while gas prices were so high for others] 'you should know under Alaska's Constitution, that money and the resources it comes from, belong to all Alaskans, not to government nor to a few 'J.R.Ewings' who, in states like Texas, own almost all the oil.  Alaska's founding fathers wanted every citizen to have a piece of the action." (p. 256)
His second point, not related to the welfare question, was that the way gas at the pump is priced meant that even if Alaska gave away its oil, the people of the rest of the US would still pay the same prices, thus the PFD had no effect on the price of oil Outside of Alaska.
"'Third, Alaskans should be no more ashamed to accept a direct payment from their one-time oil wealth in the form of a check, than folks elsewhere should be ashamed of accepting lower tax rates or greater services than other states can provide." (p. 256)
Wouldn't the money be better spent on crucial government programs?  {And this is the question I would ask, because some things can only be done collectively, like public transportation (including roads).
"I went on to explain how dividend dollars are not 'lost' for funding crucial government programs.  Rather, they increase the tax base of every community and have created a very healthy condition." (p. 256)
He tells the reporter he'd like to use the Fund to further cut public spending by listing on the ballot programs not based on need or constitutional mandate and letting the public decide.  For programs they cut, half the savings would increase the dividend check.  At first the reporter thinks this is a good idea.  But then asks, "You wouldn't put public radio on that list would you?"  "Of course I would," responds Hammond.  Then the reporter voices an attitude that seriously disturbs Hammond:
"There are some programs the government knows are best for the people, even if the people themselves don't realize it."  (p. 256)
Isn't this socialism?  
"We could have underwritten coverage for all Alaskans who had no health insurance; wiped out our local taxes, funded scholarships or granted folks no interest loans, and we would have been lauded.  While the above would have been far more socialistic, inequitable and reeking with 'Big Brotherism,' all of which the dividend program is not." (p. 255)
I think fear of the label socialism is overblown.  His point, for those who see socialism as an evil, is that with the dividend, people themselves, not the government, make decisions on how to use the money.
"Moreover, the dividend is capitalism that works for Alaska.  In a state where locals traditionally watch in frustration as most resource wealth goes Outside, the dividend's grassroots 'trickle up' distribution now accounts for the largest new capital infusion into Alaska's local economies each year." (p. 254)
There's a lot more detail in the book, but Hammond gives solid reasons for keeping the income tax AND the full dividend.  Some we hear today from those opposing the cuts to the dividend - that cutting the dividend hurts the poor much more than the rich while the income tax is fairer to all because it is progressive.  Except from those among the wealthy who believe that their wealth is solely due to their personal ability, hard work, and initiative and has nothing to do with conditions in their lives (whether family or other important people who influenced them, innate interests and abilities or physical characteristics, laws or other structural conditions that favored some over others, etc.)

I'm not saying that what was right in 1980 is necessarily right in 2016, but a lot of people in the current debates were on the wrong side of history in 1980 or they weren't even in Alaska and know none of this background.  Hammond's prediction of where we would be if the income tax was repealed, exactly describes our situation today.  His narrative of the world seems a lot more accurate than those who opposed the income tax then and still do today.

And as I'm writing this, I began to think about the current play about Jay Hammond and Wally Hickel that's having its world premier run at Cyrano's right now and how if many people went, it might cause them to reflect more on this issue.  It's similar to the release of the movie Snowden which will, I'm sure, add a lot of nuance to people's thinking about whether Snowden is a traitor or a hero or something in between.  The main difference is that movies get a much wider audience than plays.

I do hope people get copies of Tales of Alaska's Bush Rat Governor, whether from the library, which has many copies, including digital, from Title Wave or other bookstores.  The first half is Alaska adventure stories, the second half fills in a lot of political history around the pipeline and the Permanent Fund, plus a lot of issues I'd forgotten about - like D2 and Alpetco.  There's also  interesting brief mentions of people who are key players today - like Kent Dawson, one of the best paid lobbyists in Alaska today.  (See bottom of page 219)

1 comment:

  1. “Think of how stupid the average person is, and realize half of them are stupider than that.”

    George Carlin


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