My Turn: Fat cats fear taxes more than dividend loss

Posted: Thursday, October 24, 2002

The governor's race may hinge on whom voters believe will best protect dividends. Each candidate says they will. How? There are three ways.

1. Require a public vote before fund earnings are spent. When collecting signatures for an initiative to do so I almost had to beat people off with a stick. Obviously, concern for dividends which prompted 83 percent voter opposition to such spending three years ago yet prevails. Fran agrees. Where's Frank?

2. Sen. Halford, Rep. Dyson and Frank's erstwhile campaign manager, Bill Gordon, support the "parachute plan" concept. Without such a guideline within which the Legislature would be forced to fashion a "fail safe" fiscal plan likelihood of only dividends filling the gap greatly increases. Should the Legislature not adopt an adequate plan, our constitution's deficit spending prohibition will require their use. Overridden would be any requirement for a public vote first, since there'd not be time for one without the "insurance" provided by the parachute plan, dividends will probably be spent first. With it, they'd at least be spent last and only after other actions required to bring the CBR up to a predetermined threshold. Should oil prices, gas line or "development" keep it above that threshold, as Frank predicts, no "prospective" taxes would be imposed, or if already imposed would automatically decline or suspend. Fran supports that concept. Frank scoffs at it, asserting it does precisely what it does not. Perhaps he was confused when the Anchorage Daily News and The Voice of the Times criticized it for opposite reasons: The News because it would not assure imposition of taxes if favored; The Voice contending it would. The News is correct.

When Fran announced support for a dividend vote; constitutional spending limit and the Parachute Plan, one Republican told me: "Good heavens. She's more conservative than Frank." Another said he'd never voted for a Democrat, but this time he'd "hold his nose" and do so. When two of our most intelligent politicians, Halford and Ulmer, both support something it just may be worth another look.

3. Frank has gotten aboard one issue with Fran: Treat the permanent fund as an endowment, splitting 5 percent of the value between dividends and state spending. Since this requires a constitutional amendment it's consistent with her demand for a public vote. Fran announced support long before The News and The Times did so; Frank only after. Though this approach would spend fund dollars rather than only part of those dollar's earnings as now, it would continue dividends. However, it could not be implemented for at least three years. Should the CBR deplete before then, as many predict, without something like the parachute plan, dividends will be thrown into the gap. The courts will compel it.

Attempting to divert voters from dividend concern, some charge Fran is a "tax and spender" responsible for all the "sins" of the Knowles administration. Yet lieutenant governor's have but one power: conducting elections. Fran did so superbly, receiving national commendation. So far as taxing and spending, legislators control the purse strings. She could tax and spend no more than they permit.

Others charging Frank would break the bank with mega projects apparently believe the Republican Legislature, which would have to approve them, too stupid to realize unless these projects can pay their way we could end up with even a greater spending gap.

If able to peer through smoke blown by both sides, voters will see this election pretty much boils down to the fat cats vs. the not-so-fat cats. The former fear taxes more than dividend loss. The latter recognize their families would fare better with a modest tax, if needed. Graphs comparing dividend loss to income or sales taxes make it abundantly clear dividend loss would hurt far more Alaskans than would either tax.

Check for yourself. Had the income tax passed by last year's House been imposed on that year's dividend, only couples making over $140,000 and families of four making over $280,000 in taxable income would be taxed more than if they'd lost dividends.

The fat cats want to use the little guy's dividends to fill the fiscal gap. I believe this far less likely with a governor who supports all the above protections and a senator with 22 years seniority remaining in Washington to continue unfinished work on projects of major concern to Alaska such as ANWR, a gas line and subsistence.

Jay Hammond is co-chair of the Ulmer campaign for governor and is a former governor of Alaska.

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