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EDITOR, Daily News:
It’s a simple matter: For every dollar of the wealthy that the state refuses to tax, the state has to make up the missing revenue somewhere else. So the state has to further reduce the Alaska Permanent Fund dividend, it has to make further cuts to vital public services, and it has to increase the tax burden on working and middle-class Alaskans, whether by payroll or consumption taxes. Failing to tax the rich thus has very significant costs for everyone else.
These costs are on full display in the fiscal plans put forward by the governor and the state Senate. The governor’s proposal is a PFD reduction coupled with a payroll tax capped at the first $150,000 of income. The Senate majority’s plan is even worse: PFD reductions coupled with draconian service cuts that will inevitably lead to regressive local tax increases. With either plan, the financial costs will be disproportionately borne by those making less than $100,000 a year — i.e., the vast majority of Alaskans.
In order to avoid this, we must have progressive taxation. We need income and capital gains taxes that will ensure that Alaska’s wealthy residents pay their fair share. A capital gains tax in particular is essential, as the wealthy, unlike ordinary people, make most of their income from returns on investments, not wages or salaries. Stock ownership is incredibly unequal in this country and so a failure to tax capital gains gives a massive free ride to the rich. The top 1 percent of the country owns 53 percent of all stocks. The next 9 percent owns 40 percent of the stock. As for the remaining 90 percent of Americans? We own just 7 percent of stock, most of this indirectly through retirement accounts (which can and should be protected from state taxation). This is why 41 states and the District of Colombia have a capital gains tax, ranging from as low as 3 percent to as high as 13.3 percent (the highest being California).
By taxing the rich, Alaska can better pay for essential public services, guarantee higher PFDs, and more fairly distribute the burden of supporting the state government.