Progressive tax needed in Alaska

Posted: Thursday, July 05, 2001

One good thing - perhaps the only good thing - about the new federal tax cuts is the growing mass of wealth left at the top of the economic scale that Alaska could direct toward public problem-solving by reinstating our state income tax. By using progressive tax rate schedules, Alaska could at least harvest the recent windfalls to the wealthy, leaving them no worse off than before the federal cuts, without burdening those who have little discretionary income.

If this did not address our state revenue problems significantly, it could mean that it is time to consider higher and more steeply progressive state tax rates, which could balance out earlier reductions and regressive flattening of the federal tax schedule while capturing earlier windfalls.

The old Alaska income tax was only mildly progressive, but as it merely charged a small percentage of the more progressive federal tax of its day, its result was more progressive than it would be as applied to today's flatter federal tax rates.

Thanks are due to Reps. Carl Moses and Bill Hudson for sponsoring bills that would reinstate an Alaska state income tax. But the revenue potential of these bills has already been eroded by the federal tax cuts, requiring amendments that would increase their rates and make their overall effect more progressive. We need to reinstate our state income tax, update it, and make it serve Alaska's needs.

John Dunker


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