Friday, July 14, 2006

Hey Frank - Let's Try Revenue Sharing Instead Of Rebates

Rarely do I enthusiastically agree with an editorial position taken by the left-of-center Anchorage Daily News. However, ADN hit the jackpot today with their editorial column criticizing Alaska Governor Frank Murkowski's proposal to use some prospective petroleum profits tax revenues to send annual $1,000 property tax rebates to Alaskan residential property owners. Click here for editorial.

The proposal was unveiled Thursday (July 13th) during an address to the special session of the Alaska State Legislature where the governor once again pitched his "20-20" scheme (a 20% petroleum profits tax and a 20% tax credit for capital reinvestment into Alaskan infrastructure). Click here for the full text of the address.

The Anchorage Daily News believes the benefit to be too limited. Omitted from the equation are the following:

1). Renters. Constituting an estimated 35% of the state's population, they'd receive no direct benefit, although they could indirectly benefit from their landlords using tax relief to reduce or even delay future rent increases.

2). Business Owners. The rebate would apply only to residential property, not business property.

3). Rural Areas. Many rural areas employ only sales taxation for revenue generation.

ADN further supports their position by citing former Governor Walter Hickel's assertion that Alaska should be an "owner state" rather than a "state of owners".

While ADN attributes this proposal in part to election year politics, they also commend the governor for his willingness to at least consider some degree of profit-sharing. However, they chose to leave it to the public to suggest alternatives to Murkowski's scheme. And I intend to do just that.

Analysis: The ADN hits the nail on the head. Back when Frank Murkowski first took office, oil prices and state revenues were low, we were grappling with a deficit, and killing revenue sharing was one of the measures initiated to reduce the deficit. But now, prices are high and deficits have become surpluses. Consequently, I can think of two more globally beneficial ways to put those proposed petroleum profits tax revenues to work.

1). Restore Revenue Sharing. Put the money in the hands of localities and let them decide how to best use it. Certainly, as a property owner, I would love to get an annual $1,000 check. However, I pay my personal property tax to the Municipality of Anchorage, not to the State of Alaska. So the impetus for any property tax adjustment should first come from the same source to which I pay my property tax; namely, the Municipality. Restoring revenue sharing might also enable some rural communities who lost their village public safety officers (VPSOs) to hire replacements.

2). Optimize Our State Justice System. Alaska's courts and district attorneys are egregiously understaffed. It can take up to two years for a case to come to trial. In contrast, the Federal justice system in Alaska is underworked. The situation is so critical that Anchorage Mayor Mark Begich recently hired two attorneys with support staff, then immediately seconded them to the U.S. Attorney's office to move certain cases from an overcrowded state docket to a less-crowded Federal docket, where laws and penalties can be harsher. It is estimated that the state court system tries 10 times as many cases per year as the Federal court system. Resolving Anchorage's growing gang problem will be difficult without the prompt and efficient prosecution necessary to discourage excessive plea-bargaining. One of the most egregious examples of plea-bargaining was the recent case of Eber Sanchez, who plea-bargained a kidnap-rape of a minor case down to mere "sexual abuse of a minor" and got a three-year wristslap (Sanchez was not a "gangbanger" but the case is an textbook example of the problems with plea-bargaining).

Governor Murkowski's proposal is an outgrowth of the national Republicans' vision of "rebate" economics, where you toss out $300 rebate checks to the general public, pass windfall tax cuts for the rich, and call it "tax reform". However, running the government is different than running CompUSA, Office Depot, or Cal Worthington Ford. They can afford to play the "rebate" game. We can't, particularly when we have infrastructural gaps to fill and deficiencies to correct. Let's do the right thing and fix our common problems before we start tossing out rebate checks like bones to a dog.

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