United States

American Journal of Economics and Sociology, The,  Dec, 2000  by Walter Rybeck

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Oil prices, volatile at best, plunged sharply from over $30 a barrel to only $8 or $9 in 1998 and 1999. Oil production also declined. The consequent shortfall in oil revenues left the state with a budget deficit. Some officials urged reviving the state income and sales tax. Others called for dipping more deeply into the Permanent Fund to balance the budget. By early 2000, as oil prices began to climb steeply, no legislative action had been taken on such proposals.

Communications Assistant Joan Cahill with the Permanent Fund Corporation explained that oil revenues add to the Fund's principal. This is conservatively invested to generate earnings. These go, first, back to principal to offset inflation, second, to support state government, and third, to citizen shares, all according to formulas spelled out in laws.

Many citizens, especially new arrivals, got the impression that dividends were an entitlement and the sole purpose of the Permanent Fund. A public education program is needed to remind Alaskans that it was set up primarily for "a future rainy day" when oil runs dry, Ms. Cahill said.

How soon will Alaska's legislators--and lawmakers elsewhere--recognize that surface land, unlike oil or coal, need not be depleted? Rather, its value expands if cities and towns remain healthy. Further, recapturing this value induces production and job growth to keep communities healthy. A question this volume prompts is whether Alaska will be wise enough to consider converting its very low local property taxes into a robust state land-value tax for bolstering its Permanent Fund.

XIV

Conclusions

DUE IN LARGE part to more than a century of inattention to the role of land, help for reform comes from very few professional assessors, economists, tax administrators, or state and local officials. Politicians typically promise to reduce property taxes, without giving so much as a nod to their worthwhile recycling of community-created land values or to their reliability as revenue producers. A substantial share of the property tax billions currently collected (see Table 7) is derived from the land value portion and merits high praise. Unfortunately, the entire property tax, not just the tax on improvements, is constantly vilified.

Although the two-rate tax in Pittsburgh and Scranton has enjoyed local editorial support, the press generally has ignored this issue. [47] Media silence handicaps those who are trying--in California, New York, New Hampshire, West Virginia, Missouri, Wisconsin, Minnesota, the District of Columbia, Maryland and elsewhere--to duplicate or improve upon the Pennsylvania experience. [48] Often greater barriers are the state constitutions and laws that must be changed to permit or mandate tax reform.

Despite these frustrations, a favorable word about the US political system is in order. Advances achieved via single tax enclaves, special assessment districts, assessment reforms, and the two-rate tax owe much to the intergovernmental division of powers. It is difficult to imagine that these reforms would have gained a toehold if they had relied on federal action--that is, if the Congress, the White House, and the special interests they represent had had to endorse them.