Opinion: Alaska’s bright future requires a fair tax system

National news broke earlier this month that a survey of about 1,500 Amazon workers across 42 states found that one in three needed government assistance, primarily food stamps and Medicaid.

The news coincides with a 2020 Government Accountability Office analysis of nine states that found Amazon (and Walmart, too) to be among the largest employers of workers who earn low enough to qualify for food stamps.

It’s no surprise that Amazon and Walmart are near the top of the list. Walmart is the largest private employer in the US, with about 1.6 million employees, more than the population of 11 states. Amazon comes in second, with about 1.1 million employees.

Walmart and Amazon have raised wages in recent years to attract and retain workers, and those increases were evident in a survey of Amazon workers, with nearly two-thirds saying they make more at the online retailer than they did in their previous jobs. But many workers still need government assistance.

The two companies share another common thread: They operate by offering prices lower than their competitors — so low, in Amazon’s case, that it loses money on many of its sales after deducting the cost of free shipping.

Shoppers are celebrating low prices, saving tens of millions of people billions of dollars a year on food, clothing and everything else that sits on a shelf or in a shipping box. These companies generated about $1 trillion in sales in the U.S. last year.

But keeping prices and wages low comes at a cost to Amazon, Walmart and other employers across the country, as state and federal governments subsidize workers’ living expenses through programs like food stamps, Medicaid and housing assistance.

The role of government is to help families have enough food, safe housing, and health care. It can sometimes be a political struggle and cost a lot of money, but generally the state is mindful of the needs of low-income families.

This is part of the reason we impose taxes, along with paying for national security, law enforcement, roads, and all the other necessities – not just personal income taxes, but corporate taxes as well.

Which brings me to the Alaska story.

Last session, the state Legislature considered but failed to adopt changes to its corporate tax code to go after Hilcorp, Cook Inlet’s largest oil and gas producer, which bought all of BP Alaska’s assets in 2020. Hilcorp, a private company based in Texas, does not pay corporate income taxes in Alaska.

It’s not fraud, it’s the law.

State tax laws were written decades ago to apply to public corporations, but that was the case before Hilcorp and thousands of other Alaska companies were organized as closely held corporations or limited liability companies (LLCs). These increasingly popular corporate structures don’t pose a problem at the federal level or in states with personal income taxes: Corporation profits flow to their owners, who pay personal income taxes on that money.

But Alaska doesn’t have a personal income tax — the Legislature abolished it in 1980 as the state got rich off oil — which means the state doesn’t collect income taxes on private corporate profits.

All businesses, whether they are large publicly traded companies like Amazon or Walmart, privately owned, money-making businesses like Hilcorp, or large law firms or health care organizations, are able to succeed in business in large part because governments provide the roads, ports, police, and other services that they, their employees, and their customers rely on, and they also provide the financial assistance that low-wage employees need.

Just as it is fair to tax all individuals, it is fair to tax all businesses because everyone benefits from public services.

Low prices make life affordable, but without tax revenue public services become unaffordable.

Larry Persily A longtime journalist in Alaska, he has worked in federal, state and local public policy roles in both Alaska and Washington, D.C. He currently lives in Anchorage and is publisher of the weekly newspaper, the Wrangell Sentinel.

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