News from Patrick Flynn

On Thursday, December 17, Eagle River resident and former mayoral candidate Bob “The Joker” Lupo pitched his proposal for revamping Anchorage’s tax structure to the Budget & Finance committee.  (Editor’s note: “Joker” is not used pejoratively here, instead it is the moniker bestowed upon Mr. Lupo by his motorcycle club.) In a nutshell, Mr. Lupo’s plan would replace Anchorage’s property taxes with a 5% payroll tax, “payable from any wages paid from within the municipality to anyone living anywhere, so those who earn here but live elsewhere will still contribute (emphasis from Mr. Lupo).”  According to Mr. Lupo’s analysis a 5% payroll tax would yield $263.3 million from Anchorage residents and $25.3 million from non-residents for a total of $288.6 million, which exceeds current property tax collections by more than $40 million.  Lupo touted this, noting, “This is more than enough to finance the current municipality’s budget, pay off the deficit, and have a surplus to boot!”

Committee members received the concept politely but didn’t embrace it, suggesting that the proposal might be better pitched as a citizen’s initiative.  (Put another way, no one seemed ready to develop and introduce an ordinance based on Mr. Lupo’s presentation.)  We had other topics to cover, so I didn’t take the time to explain some potential flaws, but will offer them here:

• First off, Mr. Lupo is incorrect in assuming his fiscal plan would produce a revenue surplus.  The tax cap is the tax cap and, as I explained in a previous post, this limits the revenue the city can collect regardless of the type of taxes levied.
• Second, while the idea of taxing non-resident wage earners may seem attractive this plan seems to forget that the current property tax structure garners a significant portion of the revenue collected from commercial and industrial land owners (many of whom are non-residents).  Under Mr. Lupo’s scenario the people who work at the businesses on those lands would pay taxes but the businesses themselves would not.  I’d be surprised if Anchorage voters would endorse that approach.
• Finally, taxing payroll but not income tends to be regressive.  Those able to live off the income from their investments pay nothing, those who work for a paycheck do.  Three guesses as to which group tends to be less affluent.

In other fiscal news, color me surprised to learn about the Anchorage School District‘s plan to forgo offering any bonds in the April election.  Based on previous conversations I was under the impression they’d seek a maintenance bond.  The bigger surprise, however, was a subsequent editorial endorsing this approach and encouraging the Assembly to do likewise.  This would be the same editorial page that, less than a year ago, dismissed the same concept when I mused on the potential for a bond holiday.  Oh well, in situations like these one does well to recall Ralph Waldo Emerson‘s advice:

“A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.”

Anyway, I expect we’ll see at least one municipal bond proposal, the ever-popular road & drainage bond, on the April ballot.  And at least one School Board member has floated the idea of an ASD bond going before the voters at the November general (state) election, which would allow it to yield state reimbursment before the current version of that program expires November 30, 2010 (though the legislature could extend it).

With that, happy solstice to one and all.  Remember, we’re now over the hump and on the downhill run toward summer!

Regards,

Patrick