Legislature(2021 - 2022)DAVIS 106
04/10/2021 11:30 AM House WAYS & MEANS
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| Presentation(s): Economic Impact of Fiscal Solutions | |
| Adjourn |
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ALASKA STATE LEGISLATURE
HOUSE SPECIAL COMMITTEE ON WAYS AND MEANS
April 10, 2021
11:34 a.m.
MEMBERS PRESENT
Representative Ivy Spohnholz, Chair
Representative Andy Josephson
Representative Calvin Schrage
Representative Andi Story
Representative Mike Prax
MEMBERS ABSENT
Representative Adam Wool, Vice Chair
Representative David Eastman
OTHER LEGISLATORS PRESENT
Representative Dan Ortiz
Senator Robert Myers
COMMITTEE CALENDAR
PRESENTATION(S): ECONOMIC IMPACT OF FISCAL SOLUTIONS
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
CARL DAVIS, Research Director
Institute on Taxation and Economic Policy
North Carolina
POSITION STATEMENT: Provided a PowerPoint presentation, titled
"Analyzing Fiscal Solutions," dated 4/10/21.
BRAD KEITHLEY
Alaskans for Sustainable Budgets
Anchorage, Alaska
POSITION STATEMENT: Provided a PowerPoint presentation, titled
"The Economic Impact of Various Fiscal solutions," dated
4/10/21.
ACTION NARRATIVE
11:34:48 AM
CHAIR IVY SPOHNHOLZ called the House Special Committee on Ways
and Means meeting to order at 11:34 a.m. Representatives
Josephson, Schrage, Story, Prax, and Spohnholz were present at
the call to order. Also present were Representative Ortiz and
Senator Myers.
^PRESENTATION(S): Economic Impact of Fiscal Solutions
PRESENTATION(S): Economic Impact of Fiscal Solutions
11:35:23 AM
CHAIR SPOHNHOLZ announced that the only order of business would
the Economic Impact of Fiscal Solutions presentation.
11:35:55 AM
CARL DAVIS, Research Director, ITEP, introduced a PowerPoint
presentation, titled "Analyzing Fiscal Solutions" [hard copy
included in the committee packet]. He informed committee
members about ITEP, a non-profit and non-partisan research
organization, on slides 2 and 3. He noted that ITEP had been
performing tax policy research since 1980, adding that state
policy was the organization's primary focus. ITEP's recent work
in Alaska included a distributional analyses of revenue options
for Alaska (2016); an assessment of the consequences of Alaska's
House Bill 115 (2017); a comparison of the distributional impact
of revenue options for Alaska (2017); a comparison of flat-rate
income tax options for Alaska (2020).
11:38:03 AM
MR. DAVIS outlined the revenue options that would be detailed
throughout the presentation on slide 4, which read as follows:
1. PFD reduction
2. Sales tax
3. Payroll tax
4. Flat income tax (no exemption)
5. Flat income tax (with exemption)
6. Graduated rate income tax
MR. DAVIS said he would be focusing on the distributional impact
of the revenue options at different income levels. He added
that that order of the agenda was deliberate, such that it
progressed from the more regressive revenue options to the
progressive revenue options. He clarified that in the context
of taxes, "progressive" referred to a higher tax rate on higher
income people rather than a political ideology.
11:39:45 AM
MR. DAVIS continued to slide 5, titled "Tax Distribution
Analysis: Microsimulation Modeling," which read as follows
[original punctuation provided]:
Step 1: Start with a large database of information
(from IRS, Census, BLS, etc.) on income sources,
deductions, consumption, property value, family size
and structure, etc. in Alaska
Assembled on a "micro" level for thousands of
representative tax units
Step 2: Run tax calculator repeatedly, for every tax
unit
Same approach used at the federal level (both
executive and legislative branches) and in many state
governments
MR. DAVIS discussed a hypothetical reduction of $500 to the PFD
and how that would impact families as a share of their income on
slide 6. He pointed out that the PFD was a more important
source of income for lower-income families. The data indicated
that a reduction of that size would result in a 5 percent loss
of income for the lowest 20 percent of earners and only a 0.1
percent loss for the wealthiest families. He noted that the
chart on slide 6 exemplified a regressive proposal.
11:42:02 AM
REPRESENTATIVE SCHRAGE asked for the definition of a family
unit.
MR. DAVIS said the unit of measurement was a tax unit, adding
that the size of the tax unit could vary. He defined a "tax
unit" as a group of people that filed a single federal tax
return, similar to a household.
CHAIR SPOHNHOLZ inquired about the categories of family income
on slide 6.
MR. DAVIS explained that tax units were grouped into quintiles
[groups of 20 percent] from lowest income to highest. The top
20 percent was broken into three groups (next 15 percent, next 4
percent, and top 1 percent) because of the enormous amount of
income and large variety of economic circumstances in that group
[the top 20 percent].
CHAIR SPOHNHOLZ sought to confirm that the data was based on
actual tax units from [2019].
MR. DAVIS answered yes.
11:44:41 AM
REPRESENTATIVE STORY asked Mr. Davis to quantify the income
groups on slide 6 in terms of yearly earnings.
MR. DAVIS indicated that the lowest 20 percent represented tax
units earning roughly $25,000 or less; the middle 20 percent
represented tax units earning between $40,000 to $70,000; the
top 5 percent represented tax units earning over $230,000. He
noted that the groups represented Alaska's unique income
distribution.
11:46:10 AM
MR. DAVIS introduced a hypothetical three percent sales tax on
slide 7, highlighting its impact as a share of family income.
He said this was also an example of a regressive tax, although
less so than the PFD reduction because high income people paid
more in sales tax since they bought more things. Nonetheless,
the amount was small relative to their income due to the savings
rate at the top. He expounded that because a sales tax was a
tax on spending, tax units could delay paying that tax if they
saved a large portion of their earnings.
CHAIR SPOHNHOLZ asked whether the three percent sales tax that
was modeled in 2016 was capped. She said sales taxes were
regressive because they typically capped the total amount of
taxable value to $2,500. Therefore, an individual who bought an
entry level Kia could pay the same amount in sales tax as a
person who bought a Hummer, for example.
MR. DAVIS clarified that slide 7 did not model a cap. He
reported that Alaska localities were somewhat unusual relative
to the rest of the nation for having those caps. He confirmed
that implementing a cap would make the tax even more regressive,
as sales tax payments on larger purchases would be capped.
11:48:44 AM
MR. DAVIS continued discussing sales taxes around the country on
slide 8. He maintained that the regressive nature of these
taxes was inescapable. He emphasized that it was important not
to over promise how much could be accomplished through sales tax
exemptions. He pointed out that one-third to one-half of a
sales tax typically fell on businesses, which was reflected in
the overall price levels in a state. He remarked:
You can try to carve out rent from a sales tax base,
for example, but if you're taxing lumber and you're
taxing contractor services, you're going to be raising
the cost of housing anyway.
MR. DAVIS concluded that sales tax influenced overall price
level. He added that there were unique implications in Alaska
where the statewide variation in prices was huge. He said it
was easy to imagine how an individual living in an isolated area
could pay 50 percent more sales tax for the same shirt as a
person living in Anchorage due to the high prices in rural
Alaska. He went on to address the potential impact on
historically marginalized communities. He said ITEP's analyses
of other states found that minority groups who were earning
lower average incomes due to discrimination, tended to be
disproportionately impacted by sales tax. He reported that
White families in Tennessee paid about 3.9 percent of their
income in sales tax whereas Black and Hispanic families paid
about 5 percent. He indicated that the 30 percent premium on
Black and Hispanic families was primarily because they were more
likely to fall into lower income brackets where the effects of
the sales tax tended to be higher. He recommended performing a
racial impact statement if the legislature was seriously
considering a sales tax to understand if it would have a higher
impact on Alaska Native communities, for example.
11:52:42 AM
MR. DAVIS reviewed the different types of personal income on
slide 9, which read as follows:
Wages, salaries
Retirement income (IRA, pension, annuities, Social
Security)
Business income (sole proprietorship, partnership, S
corporation)
Investment income (capital gains, dividends,
interest)
Other (PFD, unemployment, farm)
MR. DAVIS directed attention to the pie chart on slide 9, which
showed that in Alaska, the major sources of personal income were
salaries and wages (69 percent), retirement income (14 percent),
business income (9 percent), and investment income (8 percent).
11:53:54 AM
MR. DAVIS discussed a hypothetical payroll tax of 2.43 percent
on slide 10, highlighting its impact as a share of family
income. In 2016, ITEP estimated that a sales tax of that size
would raise about $500 million in revenue each year. He
explained that a payroll tax was progressive through part of the
income distribution and regressive through others. At the lower
income level, things like social security income, which would
not be subject to a payroll tax, brought down the average tax
rate on lower income group. He clarified that a minimum wage
worker would still pay the full 2.43 percent; however, the
average was brought down by people, like retirees, who would not
pay a payroll tax. Alternatively, among the higher earners, the
lower rates were driven by a high degree of investment income
and business profit. He noted that the IRS data identified that
many high earners did earn a salary, but it was proportionately
less important to their overall earnings. He concluded that if
capital gains, dividends, and business profits were exempt from
taxation, the overall tax rate on high income earners tended to
be low.
11:55:38 AM
REPRESENTATIVE SCHRAGE sought to confirm that "family income"
referred to the combined personal income of the family unit.
MR. DAVIS answered yes.
11:55:58 AM
MR. DAVIS reviewed the impact of a hypothetical flat rate income
tax of 2.5 percent with no exemption on slide 11. He noted that
this was a flat tax levied on all the aforementioned types of
personal income. He added that the federal statutory definition
of income was adjusted gross income (AGI), which was what most
states utilized when crafting their own income tax. He
indicated that a flat tax on AGI, as shown on slide 11, resulted
in a flat distribution across income levels. The progressivity
depicted in the lower earners was because this model excluded
the PFD from taxation; further, a tax break on social security
income was embedded in federal AGI, which tended to benefit
people at the "bottom." He stated that the flat-rate income tax
was close to being a proportional tax in that it was neither
regressive nor progressive. He examined another flat-rate
income tax on slide 12; however, this model added a base
exemption level, such that the first $10,000 in earnings
($20,000 for married couples) would not be subject to this tax.
He explained that the base exemption would keep extremely low-
income families off the tax rolls and offer a proportionately
larger tax cut to moderate income families. He expounded that a
$10,000 exemption on a $30,000 earner would shelter one-third of
his/her income from tax; alternatively, that exemption would
only offer a tax cut of 10 percent for $100,000 earners.
11:58:33 AM
MR. DAVIS continued to slide 13, which modeled a progressive
income tax with varying rates from 0-7 percent on a base that
was linked to federal AGI with some additional exemptions. The
intention was that high-income families would pay higher tax
rates, he said. He further noted that this kind of tax was
utilized by the federal government. Slides 14-16 presented a
standardization across the four different policy options that
were calibrated to raise the same amount of money for the state.
He said the data showed how each of the four options would
impact families at different income levels. Slide 14
highlighted the impact on low-income Alaska residents,
indicating that a PFD cut (red bar) would be the costliest
option for those residents. A progressive income tax (grey bar)
with an exemption would cost low-income families very little
depending on the exemption level. Sales taxes (yellow bar) and
payroll taxes (blue bar) would fall between the two extremes.
Slide 15 examined the impact on middle-income residents, for
which the differences were less pronounced but still notable. A
PFD cut would still be the costliest option for middle-income
families, whereas a personal income tax - depending on the level
of exemption - would still be the least costly option. Slide 16
illustrated the impact on high-income residents, indicating that
a personal income tax would be the costliest option for them. A
sales tax or PFD cut would have minimal impact on high-income
residents and a payroll tax would fall somewhere in the middle.
12:02:31 PM
MR. DAVIS turned to slide 17, which compared a $500 million
sales tax to a $500 million personal income tax. He reported
that low-income groups were more impacted by the sales tax and
high-income groups were more affected by the income tax. He
suggested that most Alaskans would likely pay less under an
income tax, a point that was summarized on slide 18. He
explained that ITEP's analysis found that about four out of five
Alaskan families would pay less under a progressive income tax
as opposed to a sales tax. Slide 19 reiterated that most
families in Alaska would be impacted more by a PFD reduction
than a progressive income tax. Mr. Davis shared a quote about
taxes and economic growth from a literature review of 27
academic articles by Michael Mazerov, CBPP, on slide 20, which
read as follows:
"Some studies by reputable economists ? find that
above-average state and local taxes have a measurable
and consistently adverse impact on state economic
performance. However, many equally reputable studies
reach the opposite conclusion, and the results of many
more are mixed, ambivalent, or show that any adverse
impacts are small. There is simply no consensus?"
MR. DAVIS said the overall literature on state taxes and the
economy suggested that the effect was "a mixed bag." Some
studies indicated that a high-income tax or high taxes in
general could be damaging to a state's economy, whereas other
studies showed that they could be beneficial in instances where
the money was invested in education and infrastructure. He
opined that the effect of state taxes on the statewide economy
was often exaggerated. He believed there was not much
difference between a sales tax and an income tax from an
economic growth perspective. He said raising tax dollars and
reinvesting them in the community through infrastructure,
education, and other quality of life improvements should provide
real economic benefits over the long term.
12:07:03 PM
MR. DAVIS directed attention to slide 21, which examined job
creation in states that had recently enacted significant tax
increases. The takeaway was that the effect varied. He
recommended being conscious of economic consequences and to
steer clear of any hyperbole. He added that Alaska was
fortunate in that it had gotten by without taxes for this long.
He concluded that [the legislature] should not be overly
concerned with economic impact if they were prudent with state
spending.
12:08:51 PM
CHAIR SPOHNHOLZ said a common perception was that passing a
progressive tax would stifle a state's economic growth. She
asked whether Mr. Davis had suggested that there was no clear
evidence for or against that theory.
MR. DAVIS relayed that ITEP had performed a study on states with
high income taxes compared to states with no income taxes. The
findings suggested that there was no significant difference in
terms of economic growth. Additionally, he quashed the concern
that taxing the wealthy would causer them to leave by citing
research that showed there was no significant outmigration of
high-income residents based on tax rate. He affirmed that
dynamic economies with higher tax rates at high-income levels
existed.
CHAIR SPOHNHOLZ asked whether there were other states without an
income or sales tax.
MR. DAVIS answered New Hampshire; however, he noted that New
Hampshire was raising its taxes on residents by other means,
including investment income and an exceptionally high property
tax. He added that overall, Alaska was still a lower tax state
compared to New Hampshire for its residents, as a significant
amount of money was raised from oil.
12:11:42 PM
REPRESENTATIVE JOSEPHSON referenced studies on national
happiness and asked whether there was research that reflected
"the mood of the electorate satisfaction with their governments
and their lifestyles" that might be relevant.
MR. DAVIS said he was not well versed in that literature.
Nonetheless, he pointed out that he paid his taxes as a civic
duty and a contribution to society for the schools his kids
would attend and the roads he drove on every day. He opined
that these investments were the fabric that held society
together, which was the reason for taxes in the first place. He
believed it was important to keep investments funded by taxes.
CHAIR SPOHNHOLZ observed that a PFD reduction was one form of a
tax. She said ITEP's analysis clarified that the highest
earners were the only group that wouldn't be impacted by a PFD
cut, which was important to note when considering distributional
impacts, she said. She emphasized that a PFD reduction would
have a significant impact on the poorest and would essentially
function as a tax if an individual's income were to drop by
$2,000 without the dividend.
12:15:10 PM
CHAIR SPOHNHOLZ thanked Mr. Davis and introduced the next
presenter, Brad Keithley.
12:15:16 PM
BRAD KEITHLEY, Alaskans for Sustainable Budgets, introduced a
PowerPoint presentation, titled "The Economic Impact of Various
Fiscal Solutions" [hard copy included in the committee packet].
He began on slide 2, which outlined the following agenda for the
presentation [original punctuation provided]:
• What are the measures of economic impact
• The studies:
-2016 ISER Study & follow ups
-2019 Buckley Institute Study
-2020 Tax Foundation Study
• Balancing the impacts
• This presentation does not address the economic
impact of changes in oil or corporate taxes
MR. KEITHLEY contextualized the discussion on slide 3. He said
he would be talking about the economic impact of various
available options for closing the persistent budget deficits
that lay ahead for Alaska. The slide featured his version of a
10-year forecast using the current futures prices of oil. The
forecast showed a continued 10-year deficit at an average of
$700 million. He reiterated that competing alternatives for
closing that deficit would be discussed in the presentation,
each alternative with its own set of economic impacts. He
indicated that the goal was to identify the alternative, or
alternatives, with the least adverse economic impact. He noted
that currently, the option with the largest adverse impact on
the overall economy was being utilized. He proceeded to slide
4, titled "Measuring the economic impact," which read as follows
[original punctuation provided]:
• 2016 ISER Study looked at four impacts on 10
options:
-Income
-Jobs
-Distribution (by income level)
-Regional
• The Buckeye & Tax Foundation studies are more
limited
12:18:40 PM
MR. KEITHLEY turned to slide 5, which listed 10 options that
ISER considered for closing the deficit:
• Spending Cuts:
-Workers
-Capital
-Broad-based
-Pay
• Revenues:
-Income tax: progressive
-Income tax: 'flat-rate'
-Dividend cut
-Sales tax: more exclusions
-Sales tax: fewer exclusions
-Property tax
12:20:08 PM
MR. KEITHLEY proceeded to slide 6, which examined the output
from the 2016 ISER study. The output featured a high and low
scenario for the income and employment impacts of each of the 10
options. Slide 7 simplified the findings by presenting
midpoints, which averaged the low and high scenarios for each
option. He highlighted that the dividend cut had the highest
impact on income, as the adverse effect was 7 percent higher
than any other revenue option. Additionally, he reported that
using PFD cuts to fund the fiscal gap would have a higher
adverse impact on income than any of the spending cuts. He
noted that the spending cuts tended to have a higher impact on
jobs. Nonetheless, the adverse impact of the PFD cut was still
9 percent higher than the next highest revenue option when
considering the impacts on employment.
CHAIR SPOHNHOLZ acknowledged that the ISER study cited two
separate metrics: income impact and employment impact. She
believed that from a policy standpoint, it was important to
consider both. She further noted that spending cuts to state
employees meant a significantly larger number of lost jobs,
which tended to be middle class jobs. She said this was a
significant number for policy makers to consider in addition to
the income impacts of a PFD reduction.
MR. KEITHLEY concurred. He added that it was important to
understand that the dividend cut had a higher adverse impact on
employment than any other revenue approach.
12:23:44 PM
MR. KEITHLEY detailed ISER's distributional analysis, which
showed the impact at different income levels. He noted that
this data corresponded closely with ITEP's distributional
analysis, indicating that the PFD cut would have a higher impact
on lower- and middle-income Alaskan families than any other
option. He addressed the regional impact on slide 9, which read
as follows [original punctuation provided]:
"We would expect variation in revenue impacts by
region -
... lower-income regions are likely to be affected
relatively more by dividend cuts and sales taxes,
which have relatively greater effects on lower-income
groups.
... Higher-income regions are likely to be affected
relatively more by income taxes, which have relatively
greater effects on higher-income groups."
MR. KEITHLEY summarized that the regional impact followed the
distributional impact. He added that all approaches [to closing
the deficit] would have a distributional impact on income and
therefore, a regional impact. Slide 10 highlighted the follow-
up studies conducted by ISER, which supplemented the 2016 study.
In 2017, the first follow-up study looked at what closing the
state budget gap would cost Alaska families; the second follow-
up study examined the PFD and poverty in Alaska.
12:26:40 PM
MR. KEITHLEY reviewed the notable findings from the ISER studies
on slide 11, which read as follow [original punctuation
provided]:
• "The impact of the PFD cut falls almost
exclusively on residents, and it is highly
regressive, so it has the largest adverse impact
on the economy per dollar of revenues raised."
(2016 Short-Run Report)
• "A cut in PFDs would be by far the costliest
measure for Alaska families. ... Sales taxes
would be the next costliest for households with
children. ... The effects of any of the fiscal
options on incomes of households without children
would be much the same." (2017 Cost to Families)
MR. KEITHLEY pointed out that cutting the PFD had the largest
adverse impact because it was the only revenue approach that
would take all the money from Alaskans only. Alternatively,
non-residents would be contributing to a sales or income tax.
Slide 12 continued to summarize the notable findings from ISER
as follows [original punctuation provided]:
• "The PFD:
- ... annually lifts 15,000-25,000 Alaskans out
of poverty, depending on the size of the
dividend.
- ... reduces the number of Alaska Native living
in poverty by one-quarter.
• "Reducing the PFD by $1,000 will likely increase
the number of Alaskans below the poverty line by
12-15,000 (2% of Alaskans)." (2016 PFDs and
Poverty in Alaska)
12:30:51 PM
MR. KEITHLEY transitioned to the 2019 Buckeye Institute Report
on slide 13, which read as follows [original punctuation
provided]:
• No distributional or regional analysis
• Notional argument for reduced govt spending
• Analysis of revenue alternatives
-Static (projected)
-"Dynamic" ("predicts how individuals,
households, and businesses will alter their
economic choices in response")
MR. KEITHLEY discussed the Buckeye Institute's analysis of
various revenue options on slide 14. The revenue options
included a sales tax, a "flat" (payroll) income tax, a
progressive income tax, and a proportional (taxes paid) income
tax. He pointed out that the sales tax had an advantage over
the income taxes in terms of GDP and investment; however, sales
tax had a larger adverse impact (per $100 million raised) on
jobs and consumption than any other revenue option. He
concluded that the Buckeye Institute Report found "no clear
winner" among the various revenue approaches.
12:36:34 PM
REPRESENTATIVE PRAX opined that the findings on sales tax seemed
counterintuitive.
MR. KEITHLEY noted that much of Alaska's GDP was driven by oil.
That aside, he explained that GDP was affected by many things,
including investment and manufacturing. He pointed out that as
sales tax had a lower impact on investment, it would help drive
a (relatively) positive impact on GDP.
REPRESENTATIVE PRAX asked how many "iterations" the Buckeye
Institute performed.
MR. KEITHLEY said he never reviewed the appendix that discussed
the dynamic model.
12:38:35 PM
CHAIR SPOHNHOLZ asked Mr. Davis to comment on the dynamic
modeling that was used in the 2019 Buckeye Institute Report and
its findings.
MR. DAVIS agreed with Representative Prax. He said it was
surprising to see the results showing GDP and jobs moving in
"such different ways." He believed that ISER had done more to
account for the effect of government spending, which was
significant to a state level dynamic score. He opined that
dynamic modeling was a more speculative analysis due to the many
assumptions involved in its creation. He added that dynamic
models had a reputation for being "gameable," indicating that
they could be used to produce a large range of results. He said
he tended to approach this kind of analysis with a skeptical
view.
12:40:57 PM
MR. KEITHLEY resumed the presentation on slide 15, which
introduced the 2020 Tax Foundation Study as follows [original
punctuation provided]:
• No distributional or regional analysis
• Notional arguments for "reallocations (POMV
50/50), reductions (spending) & revenues"
• Notional analysis of sales, income, motor fuel
and oil & gas taxes
MR. KEITHLEY shared the notable arguments by the Tax Foundation
on slide 16, which read [original punctuation provided]:
Sales tax: Because it is imposed on consumption rather
than on labor, the economic impact of a sales tax is
smaller and collections are less volatile than under
tan income tax. To reduce distributional effects,
sales taxes also should be broad based, to include
both goods and services.
Motor fuel tax: While the revenues a motor fuel tax
could raise are insufficient to the task of closing
Alaska's revenue gap, an increase could make sense
particularly since its effects on the state's overall
competitiveness would be modest.
MR. KEITHLEY highlighted that the Tax Foundation made a strong
argument that if Alaska implemented a sales tax, it should be a
sales tax that would apply to both goods and services.
12:44:01 PM
MR. KEITHLEY addressed "flat taxes" on slide 17 and emphasized
the importance of identifying the tax base. ISER used taxable
income as the tax base for its flat tax, which had a smaller
base and required a higher percentage to generate the same
amount of revenue. Buckeye used a payroll tax as the tax base,
whereas the Tax Foundation utilized AGI. Additionally, ITEP
used AGI with exemptions for its December 2020 study. He
explained that someone could not support a flat tax without
first identifying its base. He progressed to slide 18, titled
"Way Forward: Balancing the Impacts," which read as follows
[original punctuation provided]:
• Determining the overall economic impact of each
option requires balancing various criteria:
income, jobs, investment, distributional &
regional impact
• No clear "best": For example, viewed from some
criteria, a sales tax has the lowest impact, but
it is unavoidably regressive and has a
disproportionately higher adverse impact on mid &
lower income Alaska families (and regions) than
other alternatives
MR. KEITHLEY continued reviewing the impacts on slide 19, which
read [original punctuation provided]:
• But a clear worst: PFD cuts have all the "largest
adverse impact" both on the overall Alaska
economy & Alaska families of the revenue options
• We support a flat tax (based on AGI) because:
-It has a relatively low impact on all factors
-Is distributionally (sic) (and regionally)
neutral
-Importantly, also ensures that ALL Alaska
families have the same "skin" in govt spending
MR. KEITHLEY thanked the committee for the opportunity to share
his thoughts on various solutions for Alaska's economy.
12:49:46 PM
REPRESENTATIVE SCHRAGE agreed that at the very least, the
solution needed to spread the burden without disproportionately
targeting low-income families and regions. He pointed out that
if no action was taken to solve the deficit, that would also
disproportionately affect low-income families and regions that
depend on state services. He asked whether Mr. Keithley agreed
that doing nothing was as poor an option as cutting the PFD.
12:50:36 PM
MR. KEITHLEY clarified that doing nothing was essentially the
spending cut option, which was included in the 2016 ISER study.
He confirmed that cutting services for low-income families would
have a disproportionately adverse impact on them. He said
another option was overdrawing the ERA, which was essentially a
tax on future generations. He maintained that the ideal
approach was one that would spread the burden equitably and have
a low adverse impact on the overall economy.
12:51:33 PM
REPRESENTATIVE SCHRAGE asked for information on a cost
comparison between a flat tax and a progressive tax. He asked
whether one was easier and cheaper to administer compared to the
other.
MR. KEITHLEY said it depended on the base. He explained that if
federal AGI was used as the base, they would both be relatively
easy because of the ability to piggyback on the federal income
tax form. He pointed out that creating a new Alaska tax would
be administratively costly. He reiterated that the difficulty
depended on the tax base.
12:52:31 PM
CHAIR SPOHNHOLZ encouraged members to read the ITEP studies
referenced by Mr. Davis, as they provided Alaska-specific
analyses.
12:53:28 PM
ADJOURNMENT
There being no further business before the committee, the House
Special Committee on Ways and Means meeting was adjourned at
[12:53] p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| ITEP Alaska Fiscal Solutions 4.10.21.pdf |
HW&M 4/10/2021 11:30:00 AM |
|
| Alaskans for Sustainable Budgets 4.10.21.pdf |
HW&M 4/10/2021 11:30:00 AM |