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Viewpoints: Letters / Opinions

The Governor’s Tax Proposal: A Free Ride for the Rich

By Ghert Abbott


January 13, 2018
Saturday AM

If one has any doubts as to the power that the rich currently exercise over our state government, then one has only to consider Governor Walker’s recent tax proposal, designed with the aim of appeasing the Republican state senate. The governor’s proposal combines a 1.5% payroll tax, capped at the first $150,000 of income, with a $1,100 cap on every Alaskan PFD (which amounts to a roughly 50% tax of the PFD’s current value). It only takes a few numbers to reveal the extreme inequity of this plan. According to the Census Bureau, in 2016 the average household income in the city of Ketchikan was $53,937 a year. According to the Institute of Taxation and Economic Policy, only roughly 7% to 10% of Alaskans have a yearly household income of over $150,000. The richest 1% of Alaskan households, those who earn $532,590 a year or higher, have an average income of $1,282,900 a year.

Under the governor’s proposal, the average Ketchikan household will be paying a state tax on practically everything they earn. In contrast, the average top 1% household will only be paying a tax on the PFD and the first $150,000 of their salary – which translates to more than a million dollars tax free, assuming all the income is from salary. Let’s now compare, assuming one PFD per household for simplicity’s sake. The payroll tax + PFD tax would therefore, at minimum, cost the average Ketchikan household 3.4% of their yearly income, while only costing the millionaire household a mere 0.25% of its yearly income. If the millionaire household received all its money from stocks and bonds, it would only pay the PFD tax: a microscopic 0.08% of its income!  The inequity increases the more PFD’s the households receive; if they both receive four dividends, then the governor’s plan could cost the average Ketchikan household around 8.8% of their income, while costing the millionaire household a mere 0.3% - 0.5% of their income.

Further adding to the inequality inherent in the governor’s proposal, the average Ketchikan household naturally pays a far higher percentage of their income in regressive local sales taxes than a millionaire household. Finally, the top 1% of Alaskans are about to receive an enormous and permanent tax windfall from the Federal government, while most Alaskans are scheduled for a permanent Federal tax increase in 2025. We are threatened with a system where those who make the least pay the most and those who make the most pay the least.

To avoid such a system requires progressive taxation. We need progressive income and capital gains taxes that will ensure that Alaska’s top 1% 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% owns 53% of all stocks. The next 9% owns 40% of the stock. As for the remaining 90% of Americans? We own just 7% of stock, most of this indirectly through retirement accounts (which can and should be protected from state taxation). Making the rich pay their fair share is why 41 states and the District of Colombia have a capital gains tax, ranging from as low as 3% to as high as 13.3% (the highest being California). By taxing the rich, we can reduce the tax burden of ordinary Alaskans and fairly distribute the burden of supporting essential state services.

Ghert Abbott
Ketchikan, Alaska

About: Ghert Abbott was born in Ketchikan in 1986. He is a graduate of Ketchikan High School and the University of Alaska Southeast-Ketchikan.


Editor's Note:

The text of this letter was NOT edited by the SitNews Editor.


Received January 10, 2017 - Published January 13, 2018

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