In the spring of 2019, Alaska Policy Forum published a report with economists from The Buckeye Institute examining the need for state spending reductions and the economic effects of 2019 tax proposals. While the numbers are not up to date for 2022, the economic effects discussed are the same.
The authors found that all tax proposals from 2019, such as implementing an income tax and a statewide sales tax, would hurt Alaska’s economy and add little revenue to the state’s pocketbook. While implementing a sales tax rather than an income tax would hurt Alaskans less, economists show that all taxes “[stunt] Alaska’s economic growth, [create] fewer jobs, and [fail] to generate enough revenue to cover current overspending.”
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Additionally, their “findings are consistent with other empirical economic research that consistently demonstrates the harmful economic effects of taxation, and confirms that the private sector – not government spending – drives economic growth and prosperity.”
What conclusion can we take from this report today? While implementing taxes to raise revenues might sound tempting to policymakers, the burden will be too great for Alaskans. Reducing total state spending before discussing an income tax or broad-based sales tax is the necessary first step policymakers must make to address budget woes.
Click here to open a PDF of the report in a new tab. The PDF includes the Appendix.