My Turn: More taxes or more business?

Posted: Sunday, October 27, 2002

While some advocate reinstating the individual income tax or tapping Alaska Permanent Fund earnings to cover the state's fiscal gap, candidate for governor, Sen. Frank Murkowski, says he will seek more business. His plan is to build roads, railroads, ferries and power interties to attract business and provide good jobs for Alaskans. It provides more revenue for the state general fund and the Permanent Fund because there still is an income tax and other taxes upon corporations, large and small.

Receipts of the corporate income tax measures the health of Alaska businesses on which Alaskans depend for jobs and revenue. In fiscal 1991, corporations, except those in oil and gas, paid the state $37.9 million in income taxes. That rose to $53.3 million five years later, an increase of 41 percent. That indicated more and healthier businesses. Going ahead four more years to '01, the state received $59.5 million in corporate income taxes, an increase of only 12 percent from '96. That indicates a slowdown in the growth and health of businesses - the economy. What happened?

One thing that happened is that the timber industry was killed off.

Lost, too, has been income of oil service companies as oil production dropped, the income of fish processors as competition beat down prices, and income from visitor industry businesses. (The only visitor businesses to increase were tour ships that pay no federal or state taxes.)

Murkowski proposes building infrastructure to attract new businesses and make Alaska businesses more competitive using cheaper transportation and power.

How to pay for the construction program? The same way Alaskans buy a car, home or go into business. Borrow the money. When the government borrows it sells bonds. The state Legislature appropriates more than $100 a million for capital projects each year. If that money was used to finance bonds for 20 years it would cover $10 billion in bonds for a whale of a lot of capital projects. Murkowski says his program will need only $30 million a year, leaving the governor and Legislature more than $70 million to dole out to other capital projects or use to partially cover the fiscal gap.

There won't be enough increase in corporate income tax to cover any fiscal gap. There are tax receipts aside from income that increase if infrastructure is improved and if government regulation and permitting encourages development. Start with the oil and gas industry, which paid $338 million in corporate income tax in '01. It also paid $45 million in state property taxes, $800 million in royalties and $700 million in production taxes. More oil and gas development and encouraging a petro-chemical industry is advocated by Murkowski. He will seek independent drillers, citing only 12 oil and gas wells drilled in Alaska in 2001, compared with 19,933 in western Canada. He will encourage gas production at Cape Thompson by 2006 using gas-to-liquid technology that will get natural gas to market before the pipeline to the Lower 48 is completed.

Building roads to mineral deposits increases income from the state's mineral licensing tax on coal and hard rock mining, including sand and gravel. That tax is based on volume and value. Receipts between $500,000 and $2 million a year, plus the industry's corporate income tax, could use a big boost

New and improved roads, such as better access to Southeast Alaska, mean an increase in the visitor business, and boosts the ferry system. That means more fuel, liquor, corporate and other taxes.

Next to oil and gas, the fishing industry is the biggest taxpayer. Better infrastructure - cheaper power and transportation costs - increases its volume, competitiveness, and state revenue.

Murkowski hasn't given up on the timber industry, proposing land trades with the federal government to create a commercial state forest of a million acres to harvest on a sustainable basis to support education. He also is pushing the land grant for the University of Alaska that could net the institution up to 750,000 acres of state and federal land, revenue from which would help funds its operations.

Murkowski advocates more cuts in the cost of government to balance the state's ledger. Even in Juneau, whose major industry is consuming tax dollars, a poll found 35 percent favor cutting costs over 30 percent favoring an individual income tax and 13 percent favoring tapping the Permanent Fund.

Voters have a choice: the same old way or the Murkowski way.

Williams is retired publisher of the Ketchikan Daily News and a former member of the University of Alaska Board of Regents.

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