SitNews - Stories in the News - Ketchikan, Alaska


Ketchikan is becoming more expensive every day.
By Rodney Dial


April 23, 2010

As our national tax day passes, a few things you may want to consider regarding the future of your family's finances. The following is an excerpt from a Newsweek article posted on 4/15/10 titled "Today is the best tax day of your life", by Robert J. Samuelson. Newsweek tends to be a liberal leaning publication and this is not conservative hype.

Samuelson writes the following:

By all estimates, the budget outlook is daunting. The latest projections of the Congressional Budget Office reckon the cumulative deficits under President Obama's policies to be $12.7 trillion from 2009 to 2020. In 2020 the estimated annual deficit will be $1.25 trillion, or 5.6 percent of the economy (gross domestic product), despite assumed "full employment" of 5 percent. And the deficits get larger with every succeeding year. Given unavoidable uncertainties, these precise projections are likely to prove wrong. But their basic message seems incontestable: there's a large and growing gap between the government's promises and the existing tax base.

How big a tax increase would be needed to close the gap? Well, huge. To put things in perspective, all federal taxes (income, payroll, and excise) averaged 18.1 percent of GDP from 1970 to 2009. Under CBO's assumptions about Obama's policies, taxes in 2020 would already be slightly higher, at 19.6 percent of GDP. But on top of that, there'd need to be a further tax boost approaching a third to balance the budget, because spending is projected at 25.2 percent of GDP. Needless to say, this would be the largest tax burden in U.S. history, even including World War II.

A recent study by Rosanne Altshuler, Katherine Lim, and Roberton Williams of the Tax Policy Center shows what this would mean for income tax rates. Their study uses earlier and somewhat more optimistic CBO projections. Moreover, the study assumes only that the budget deficit is cut to 2 percent of GDP-not that it's balanced. Still, income tax rates would have to rise sharply to reach even this goal. If all income tax rates were increased proportionately, today's lowest rate of 10 percent would go to 15 percent and the highest rate of 35 percent would go to 52 percent. If only today's top two tax rates of 33 percent and 35 percent were raised, the new top rates would be 86 percent and 91 percent. At those astronomical levels, the study says, the well-off and wealthy would work less and pursue aggressive tax avoidance. Tax revenues would suffer.

Here are a few more things worth considering:

Ketchikan (City) now has the highest property tax of any community in SE Alaska, and is more than double of many communities. For example:

A 300,000 home generates the following property taxes (approx. service districts change the amount slightly):

Sitka $1800 yearly, or $150 per month, or $54,000 over the life of a 30 yr loan (does not include assessment increases, actual amount is far higher)

Ketchikan $3600 yearly, or $300 per month, or min $108,000, 30 yr loan.

If that were not bad enough, only one city in Alaska has a higher sales tax rate than Ketchikan. And that city, has a lower property tax rate.

When you factor in the property taxes on a average home, the sales taxes, and hidden taxes that are passed on to you through KPU electric, water, and phone rates called payments in lieu of taxes (PILT) the average homeowner is paying AT LEAST $500 per month to support local government. When you factor in taxes passed on to you by local businesses the cost is even higher.

An informative article by the Cato Institue titled "A consumer guide to taxes: How much do you really pay in taxes" by George Nastas and Stephen Moore, shed light on what we really pay to buy something. Here are a few sections of that article:

In 1960 middle-income Americans paid less than 30 percent of their earnings in local, state, and federal taxes; today that figure is up to 40 percent.[1]

That is a good measure of the impact of taxes on American workers because the main reason people work is to earn money to buy the things they want. But much of American workers' income is consumed by taxes. The question is, how much? Our standard example is the purchase of a new car with a sticker price of $10,000. Because of taxes, the average worker needs to earn significantly more than $10,000 extra income to pay for that car.

* In an average-tax state a middle-income worker with earnings of $34,000 must earn an additional $7,038 to purchase a $10,000 car. That means the worker must earn $1O,000 to pay for the car and $7,038 to pay the sales tax on the car and the income and payroll taxes on the earnings used to pay for the car.

* A worker with an income of $34,000 must work three and a half months of the year to pay for the car, and then two and a half additional months to pay the taxes on the income used to purchase the car.

* For a self-employed middle-income worker, the true cost of the $10,000 car is $18,320, because self- employed workers pay a 14.1 percent self-employment tax, to cover the employee and the employer shares of Social Security and Medicare (FICA) payroll taxes, on their incomes.

Taxes also affect the true price of a variety of other products and services.

* In an average-tax state the amount of earnings needed to pay for a $1,500 computer is $2,568. A self-employed worker needs $2,748.

* In an average-tax state the amount of earnings needed to pay for a year's tuition at a private college ($8,000) is $13,107, and a self-employed worker needs $14,092.

* In an average-tax state the typical driver spends $479 a year on gasoline, excluding all taxes. But the income needed to purchase that gasoline, after accounting for all taxes including the federal and state gasoline taxes, is $1,065. Self-employed workers must earn $1,145 to purchase the gasoline.

* In low-tax states the true price of goods and services, including all taxes, is one and a half times the stated price. To figure how much of your income goes to purchase an item, multiply its price tag by 1.5.

The purpose of this study is to provide practical and understandable examples of how much middle-income workers actually pay in taxes when purchasing goods and services. We address the question by showing how much extra income a person must earn to pay for major purchases. In all of our examples we examine the taxes paid by a married couple with an income between $34,000 and $53,400.

A few things of note regarding this article. It states that it does not factor in the taxes businesses must pay and pass onto consumers. Also, although Alaska has low state taxes, Ketchikan ranks in the upper third on property and sales tax collections.

Sales taxes also take a disproportionate bite in Alaska out of the cost of goods sold as shipping costs and lower economy of scale increase the base cost and the amount subject to be taxed. A good example is how much more gasoline is in Ketchikan vs. Seattle, even though our fuel distributors buy fuel from that area.

Here is what the city and borough reports in their FY2011 legislative funding requests the following (pg #2)

"To meet the fiscal demands of LOCAL government, citizens of the KGB shouldered the following impacts in the fiscal year just ended $63,859,401.00, which is equivalent to $11,826 per household in Ketchikan. If you question this statement I would suggest you verify it for yourself, it is listed on the boroughs web page.

How did we get to this high LOCAL tax burden? Well, we simply allowed our local governments to be stacked with liberal leaning representatives who have no problem redistributing your wealth. Both the City and Borough give away large percentages of revenue to non-profit groups and organizations each year. The combined city and borough "give-away" for non governmental programs now EXCEEDS that given out in Anchorage.

Many also bought into the tired arguments that if we fail to fund some non profits, people won't want to live or move here (even though we didn't fund them in the past), or the arguments that we should somehow be willing to tax ourselves more because we pay low state taxes or get a dividend (as if that was a bad thing to be corrected). How many times have you hear that you should vote for X because it's only the price of a cup of coffee per day? Its always interesting that those who make the "Our state taxes are low" argument fail to mention that our local taxes are above average, or that our cost of living is approximately 38% higher than the lover 48 average.

As you may recall, no one in local government asked your permission to enter into mulit-million dollar contracts for:

1. Library Plans

2. Whitecliff

3. Berth III

The above represent three projects that were instituted through contracts and with reserves, to avoid a public bond vote our elected officials knew would not be approved. These projects represent over $110 million in taxpayer liability.

Why isn't anyone concerned that their water rates are going up more than ten times the rate of inflation? Or that hundreds of thousands of dollars of YOUR local money is being spent on non-essential items?

We are laying the foundation of our future local spending now that is unsustainable that we will have to live with as our federal tax rates continue to increase in the future. Thanks in part to Senator Begich, our State will soon be straddled with massive increases in Medicare and Medicade spending to comply with the recently passed federal health care legislation. The new mandates in this legislation will also make health insurance more expensive for thousands of state and local government employees and dependants. All of these costs will trickle down to every citizen. Sen. Begich's upcoming vote on the Medicare "Dr. Fix" will prove this (stay tuned).

Most new tax increases are hidden, or are incrementally small and go unnoticed. Do you remember what a can of corn cost last year? Would you notice if it cost 10 cents more next week? All business taxes are passed down to the consumer.

Ketchikan is becoming more expensive every day. If that matters for you get involved in local government, testify at the council meetings, and elect more conservative members.

Rodney Dial
Ketchikan, AK

Received April 22, 2010 - Published April 23, 2010


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Ketchikan, Alaska