Alaska Has a Bigger Problem Than Low Oil Prices

As anyone who’s filled up their tank lately can attest, oil prices are down – way down. Inexpensive trips to the gas station may put a smile on the average driver’s face, but the ramifications are significant for economies dependent on oil. Few states are feeling this more acutely than Alaska. With oil prices and oil production in decline, the state lacks two-thirds of the revenue needed to cover this year’s $5.2 billion budget.

Unfortunately, Alaska Governor Bill Walker is proposing a quick-fix solution that could do long-term damage: the imposition of a state income tax. As analysis in An Inquiry into the Nature and Causes of the Wealth of States shows, adopting an income tax spells disaster. Each and every state (there are eleven in total) that introduced the income tax since 1960 has experienced decline across a broad array of metrics. In terms of population, all eleven states have declined in comparison to the remaining 39 states (West Virginia is the unenviable “leader” of this pack, with a relative population decline of a full 50%). In terms of state gross domestic product, all eleven states also declined as a share of the remaining 39 states (Michigan took a particularly precipitous plunge, with a relative fall in gross state product of 57%).

As my Wealth of States co-authors and I write: “The lesson is pretty basic – if you don’t currently have an income tax, do not adopt one.” No place should understand this better than Alaska, which in 1980 eliminated the state income tax for individuals. Under Governor Walker’s proposed plan, which would turn the clock back on more than 35 years of economic progress . . . (Read more from “Alaska Has a Bigger Problem Than Low Oil Prices” HERE)

Follow Joe Miller on Twitter HERE and Facebook HERE.