News from Patrick Flynn

In the past few weeks I’ve received many e-mails and a few calls regarding fiscal matters.  Some have focused on the 2009 MOA budget, others on labor contracts in general and a few on specific labor contracts.  Some favor added spending, some want to see cuts but very few have risen to my challenge to describe how they would proceed from a macro perspective.  So I’ll get more specific.

Going door-to-door during my campaign I talked to some folks worried about property taxes.  Their numbers were not overwhelming and the characteristic they often shared with many of those who have recently e-mailed and called was retirement.  Specifically, many of the concerns were voiced by those who are living on a fixed income and see rising property taxes as an impediment to staying in their homes.  As we talked further some, but not all, agreed that perhaps it is time to once again consider a sales tax for Anchorage.

Here’s my take: I hate sales taxes.

I don’t like the coins in my pocket, I don’t like constantly performing mental calculations to figure out “real” prices and I especially don’t like their regressive nature.  (On the flip side, doing math problems in one’s head is probably good for maintaining mental acuity.  And you’re welcome to posit that sales taxes are really consumption taxes, and therefore not regressive, but don’t expect me or any credible economist to agree.)  That said, as I told the ADN editorial board and others, I’m willing to consider a sales tax subject to a few conditions:

1. Exempt food, medicine and other essentials to reduce regressivity.  Another idea on this front is how we handle sales tax on vehicles.  Most jurisdictions cap the amount of tax paid on any single purchase, which protects car sales in those communities.  As one of the folks I spoke with pointed out, this often means a single parent buying a basic car for transportation pays the same tax as an affluent person buying a Hummer.  Perhaps we could design the sales tax to exempt, for example, the first $20,000 of a vehicle purchase and then apply to the rest of the purchase price, or maybe just the amount between $20,001 and $40,000.
2. Use the sales tax proceeds to provide dollar-for-dollar reductions in property taxes.  The costs of implementing and administering a new tax means we wouldn’t achieve a 100% reduction, but likely could achieve 98% or more.
3. Include a provision that sunsets (ends) the sales tax after five years unless voters elect to continue the program.

Obviously this approach wouldn’t create more revenue for more government.  Neither would it force significant cuts to municipal programs.  What it would do is spread the burden – perceived or real, depending on your point of view – for funding our city government.  That leads to the primary reason I’m willing to consider a sales tax.  Too much of MOA’s revenue, about 50%, is dependent upon a single source – property taxes – which is unhealthy.  That’s bad policy for a business and bad policy for a government (see Alaska, State of, oil taxes as a general fund source).

As most readers know the Anchorage Charter requires 60% voter approval of a sales tax, which means we need a proposal that balances the interests of our neighbors.  So what do you think?  Is my approach a good one?  If not, how would you change it?  Should I work this issue with my colleagues or wait for another day?  I look forward to hearing from you!  (And, while you’re at it, take the poll below.)

Regards,

Patrick

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