Tuesday, March 08, 2011

Alaska's Combined State And Local Tax Burden Lowest In The Nation, But Anchorage's Property Tax Burden Amongst The Highest, 114th Out Of 1,823

The Anchorage Tomorrow website is making a pitch on behalf of the General Obligation Bonds which will appear on the April 5th, 2011 Municipal Election ballot. Specifically, they urge people to vote Yes on Propositions 4, 5, and 6. All propositions are listed HERE.

One of their strongest justifications is the fact that the additional indebtedness incurred by passage of the bonds will be offset by the fact that the Municipality of Anchorage will retire almost $26.1 million worth of existing General Obligation (GO) bonds in 2011, equating to almost 72 percent of the proposed 2011 GO bond amount of $36.2 million. The net increase in annual debt service is estimated at $2.9 million, which equates to approximately $2.87/month for an assessed property value of $300,000.

But Anchorage Tomorrow also cites Alaska's low state-local tax burden as additional justification. Specifically, they note that in 2009, Alaska had the lowest state and local tax burden (6.3 percent) when compared with all states for the last 30 years. This statement originates from the Tax Foundation website.

However, Anchorage's General Obligation Bonds are paid for with property taxes. And what Anchorage Tomorrow fails to mention is that Anchorage property taxes alone are among the highest in the nation. The Tax Foundation extracted data from the U.S. Census Bureau's 2007-2009 American Community Survey, computed the median property taxes for all counties with a population of 20,000 or more, and ranked them. Their results show that out of 1,823 qualifying counties (and/or boroughs/municipalities), Anchorage's median property taxes for the 2007-2009 period were $3,315, ranking 114th highest in the nation.

When initialized against median household income, the burden is mitigated somewhat, as Anchorage's rating drops to 256th, but it still places the city among the more heavily-taxed communities in the nation in terms of property taxes, even when one considers the large area that must be serviced and the additional difficulties imposed by weather extremes. Other data published by the Tax Foundation indicates that the other predominantly-rural boroughs of Alaska not listed in the other reference have much lower property taxes, with the Bethel Census Area averaging a mere $105 and Southeast Fairbanks only $109 for the period 2005-2009.

So to use Alaska's "low tax burden" to sell Anchorage municipal propositions when they are paid for by already-high Anchorage property taxes is a weak argument. Of course, as property owners, it is within our power to correct this problem by implementing a municipal sales tax which would effect a dollar-for-dollar reduction in property taxes, while diversifying and stabilizing our revenue stream.

The underlying decision we need to make is this: Do we want to sustain the present level of municipal services at a time in which inflation is driving up the cost of those services? If not, what do we cut -- and how will people be affected by the cuts?

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