My turn: Dividends, beer and houses

Posted: Monday, October 22, 2007

Millionaire Rush Limbaugh once proposed a "flat tax" under which everybody paid the same amount, $5,000. He said he wanted to pay his share right now, so you knew that $5,000 meant little to him.

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But even the "ditto-heads" in his audience did not agree. Why not? Because an equal amount tax that seems small to millionaires remains quite large for most other people.

Limbaugh instantly dropped his flat tax idea.

His audience knew the math: An equal amount is a bigger percentage of a smaller income.

The Juneau Empire recently reprinted a Peninsula Clarion editorial suggesting Alaska Permanent Fund earnings pay for government services. But not all words printed - or reprinted - are true.

For example, taking fund earnings for government means less fund earnings remain for dividends. That means you - and every Alaskan - get smaller dividends. This equal-amount money loss resembles Limbaugh's flat tax.

Cutting every dividend hurts moderate- and low-income Alaskans more than such a cut hurts millionaires - like Limbaugh's flat tax. That's probably why Alaskans in 1999 voted 83 percent no, advising us not to spend even some permanent fund money for government.

As in Juneau's 2007 fluoridation election, the 1999 yes side had much more money, yet lost. As with Limbaugh's flat tax, the 1999 audience (of Alaskan voters) knew the math.

Here are more questionable printed words:

Recently, another letter writer called it "ludicrous" to ship materials to Juneau for manufacture and export. Yet it's that method that helped Japan rise economically. That method also helps a Juneau manufacturing and exporting firm.

Which firm? Drink Alaskan beer and find out. Are hops Juneau-grown? Are bottles Alaska-made? Does the brewery provide Juneau jobs?

Since 1950, economists knew that manufacturing firms made more money than did raw materials suppliers.

Raw materials sellers made money in the 18th and 19th centuries. But later, by adding knowledge to transform raw materials and add value, 20th century manufacturers made even more money.

Management guru Peter Drucker suggests that, in the 21st century, successful firms add knowledge and value to ideas, not just to things. Examples: software, movies, medicine, universities, financiers.

Yes, the world still needs fish, minerals, lumber, and other raw materials. But exporting raw materials and importing finished goods continues Alaska's frozen 250-year history as an economic colony.

But who makes the real money? Fishermen trappers, loggers, and miners - or Bill Gates and Warren Buffett?

Times change; needs change with the times, yes?

SouthEast Alaska Regional Health Consortium is now Southeast Alaska's largest private employer. Does that fact signal Juneau's future economic success?

Maybe Alaskans and Americans demand more health and scenic cruises now, than logs, fur, fish, unfunded roads, or gold?

Will economic development take different forms now than in the 1950s, or 1850s, or 1750s? Seems likely, yes?

One last example of doubtful printed words: Empire articles and letters suggest that some people think the Juneau Assembly is somehow to blame for high Juneau housing prices.

If you travel at all, you noticed housing prices skyrocket across the country. Have you priced housing in Seattle, Portland, or Southern California? Way high.

Our country paid for two wars (Afghanistan, not just Iraq) with borrowed billions - wars now costing about $2-3 billion dollars per week. As one result of that borrowing, the Canadian dollar is now worth more than the American dollar. As the value of the American dollar shrinks, the prices of real items - like houses - goes up, way up.

You need much more worth - less American dollars to buy the same house. That's inflation - the "hidden tax." (Imagine that: Borrowing has tax-like effects.)

More building after Lower 48 hurricanes continued upward pressure on housing prices.

These national causes of greatly inflated housing prices, nationwide, likely require for their solution changes in or by the national government, not the local one.

So, consider carefully what you read in print - some of it may even be true!

• Joe Sonneman is a former Juneau resident who resides in Retsil, Wash.

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