Tax Code Concerns

December 8, 2022 – We met with Robert Venibles one snowy afternoon at his place of work, where Southeast Conference gives unbiased economic data to policy makers, voters and community investors. It quickly became apparent that there was a concern tying all three together: “There’s a political, fiscal, and regulatory uncertainty that is a big barrier for private investment,” he said.

Robert put it to us: “How much is your tax burden to the State of Alaska?”

We guessed it was limited, but his answer was lower than that: “You pay $0 to the State of Alaska. Sales tax is local. Property tax is local. You pay 0.” He then told us why that wasn’t optimal: “You require state services. … I don’t know you, but I bet you demand them in your dreams sometimes. ‘That State of Alaska, they should have plowed that road, they should have done this or that.’”

The problem is that someone has to pay for this and that. Turns out, it’s businesses: “The State does not have anything but a business tax structure. The people of Alaska demand things, and when they want things, what they’re demanding is more taxes on corporate businesses … and that’s a barrier, because they don't know what it’s going to cost them to do business in your community.”

Is it possible that our tax code is keeping local businesses from being open year-round, or from opening at all? Whether or not that’s the case, the tax code is currently set the way we think we want it: “Alaskans have been suggested that they pay for some of the services that they want, but so far, they have steadfastly refused, and if they’re going to refuse to pay the bill, then it’s likely going to be a business cost.”

In the last few years, we have had help paying for state services from the federal government, “But there’s probably only one more year of all these federal funds being available before we have to get back to the hard discussions about, well, how often do you want your roads plowed? How well do we want to pay our teachers? And what are you willing to contribute for that?”

There are clearly some important community conversations coming up about the balance between what citizens and businesses will be contributing to the State. Without enough involvement from either, one or the other could get driven away. This is something we’ll need to solve, because, as Robert says, “The State of Alaska really does not have a clear vision for how it’s going to pay for needed public services long term.”