Ed. Note: Some people like to say Alaskan's do not pay taxes, just because we do not have a state income tax. We like this essay for its viewpoint and insight on taxes in Alaska.

By Kevin McGehee

Why on earth would people look at the state government's chronic deficit and oppose spending cuts?

It's a reasonable question, because the reasoning such people use to support their views has little to do with the planet on which you and I live. The state's revenue base isn't growing; the only way to close the deficit gap without spending cuts, is to impose taxes on Alaskans.

In any other state, almost the entire state government would be funded by taxes paid by citizens. As a result, the size of the state government would be controlled by the strength of the state's economy. But what we have in Alaska is an unusual revenue situation. The market value of our natural resources exported, is greater than the taxable value of the state's own economy. When the North Slope oilfields were opened, the demands on state government were small enough that taxes on Alaskans could be eliminated without damaging the government's ability to deliver essential services.

Unfortunately for good sense, the money that came rolling in was many times greater than the government's needs. The sensible approach remained popular enough, for a while, that the Permanent Fund was created. But even so, the vast influx of money to the state treasury was too big. It began to burn holes in the pockets of politicians who were backed by those groups with an interest in inflating government spending. Forgetting that it wasn't their money, they began to spend it with gusto.

And now, in an ironic twist, those who sold their big spending schemes by pointing out that it was being funded by "free money," now fight to defend those schemes by playing the guilt card: "You Alaskans don't pay any taxes! You're spoiled!"

Don't pay taxes? That North Slope oil belongs to all of us; therefore the money the oil companies pay in royalties and fees for the privilege of extracting and selling that oil, also belongs to us. To the extent that any of that money funds state government, we do pay state taxes. To argue that -- because the government lets us have back some of the portion of our oil profits that the government doesn't spend -- we're actually subsidized by state government IS SIMPLY ASININE.

Yet this is the argument being made by the opponents of government spending cuts. Defeating this asinine logic depends on getting the true logic of the situation in front of the people of this state so they can see the "no spending cuts" argument for what it is -- an attempt to justify metastasizing our current upside-down government funding situation into a Recipe (sic) for ruin when, at some point in the future, the North Slope oil reserves really do run out.

Meanwhile, what about the Interior's economic future? Well, there's a lot of talk about a few hundred new Alyeska jobs coming to Fairbanks. Fine. If increased oilfield activity up north leads Alyeska to further expand in the Fairbanks/North Pole area, that too will add to the strength of the local economy. But where is the growth going to come from, if Alyeska doesn't Expand further?

The ripple effect from these new jobs will be finite. To have sustained growth requires something else. Alyeska's contribution is positive, but it weakens the diversification of the economic base. To bring real sustained growth, a project must have the potential to invite a subsequent influx of new opportunities. Alyeska's corporate edict doesn't meet that need.

The natural gas pipeline hasn't been built, but it's already contributed a great deal of gas to discussions of the economy. I think Fred Pratt's recent column on the proposal injects a much needed dose of reality -- the last thing we in the Interior need is a boondoggle that will drive up our already high fuel costs.

Neither the proposed natural gas pipeline nor the oil pipeline itself really contribute the kind of open-ended growth potential that the Interior, and in fact all of Alaska, desperately needs. Those of us who are here now need a strong economy to make long-term prosperity possible. The next generation, if it is to stay here instead of moving to the Lower 48 (or, worse, Anchorage) needs assurance that whatever boom they experience when they're young won't have evaporated by the time their own children come of age.

Which leads me to the debate over ownership of the Alaska Railroad.

If no current or prospective owner or management team is seriously contemplating linking the railroad physically to Canada and the Lower 48, does it matter who owns it? Only as a purely philosophical matter, I'm sure. Yet linking the Alaska Railroad to the transcontinental railroad network that serves the manufacturers of goods we use, and also serves the consumers of goods we do (or can) produce, is exactly the kind of open-ended growth opportunity that would make all the difference.

Gov. Knowles made a lot of campaign points back in '94 about adding value to our exports -- having raw materials extracted from Alaska processed in Alaska. Economically, processing raw materials here before shipping them out, makes only very limited sense. Once processed, the materials become more vulnerable to damage in shipping, and the loss resulting from such damage is greater. Yet in-state processing becomes more viable across a wider range of products if the complications that currently apply to shipping from Alaska, are reduced.

March 27, 1997 by Kevin McGehee North Pole, Alaska The ADVANCE ALASKA Network

ITA disclaimer: Editorials by various authors in our guest section have been reprinted for your information and entertainment. The authors are not necessarily members, nor do they necessarily agree with the philosophy, aims, or endorsements of the Interior Taxpayers' Association.

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