Opinion: State defends its right to reduce non-existent taxes

There is an inevitable irony in the fact that Alaska has joined with a dozen other states in suing the federal government over their right to cut taxes.

This from a state that has no property tax on homes or businesses, only on the oil industry.

No state sales tax.

No income tax since 1979.

The lowest fuel tax in the country by far.

There were few federal conditions attached to the US $ 1.9 trillion bailout law, which handed states hundreds of billions of dollars earlier this year to help pay the bills for the pandemic, cover lost income and rebuild their communities. But a channel added to the Senate barred states from using their share of federal pandemic aid to cut taxes.

Unusual for the Senate, the provision made sense: here’s a gift of nearly $ 200 billion from the US Treasury to help states pay bills, help with housing, food, schools and utilities, whatever. you want, don’t use it. lower taxes to win the favor of voters.

Lawyers for the Department of Justice argued in court that federal money should be used for its intended purpose – pandemic recovery. States can “cut any taxes they want, as long as they don’t use federal aid” to cover them, attorneys for the Department of Justice told the court.

But this federal aid-linked channel violated states’ constitutional rights, the lawsuit filed by 13 states, including Alaska, said.

An Alabama federal judge, in a final ruling on Nov. 15, said Congress had gone too far. He ruled in favor of the states and asked the US Treasury not to apply the provision.

Alaska Governor Mike Dunleavy used the court’s victory to blame the president, a tactic common among Alaskan elected officials. “Lately, we have witnessed the tireless attempts of the Biden administration to seize power from the states,” the governor said in a statement prepared a day after the court ruling. “Now we have proven that the White House cannot continue to go too far and threaten individual freedoms with unconstitutional mandates.”

What individual freedoms were at stake with Congress’ intention to pay for services, not tax cuts?

In a fight for fairness, the governor’s statement acknowledged: “Currently, there are no proposals pending in Alaska to reduce taxes, so the law would not have had an immediate and direct impact on the State.”

Not only are “there no pending proposals” to reduce taxes, but there are no specific proposals from the governor to raise new revenue to cover the state’s long-term budget deficit. Dunleavy’s only proposal is to withdraw more money from the Alaska Permanent Fund in the hope that new income will magically materialize to cover the bills for years to come.

Instead of a political movement to sue the federal government, how about a movement that actually helps the state.

Larry Persily is a longtime reporter from Alaska, with breaks for federal, state and municipal services in the areas of oil and gas, taxes, and tax policy. He is currently the owner and editor of the weekly Wrangell Sentinel.

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