OPINION: State shouldn’t pick winners with property tax exemptions

Nobody likes paying taxes. But mostly we get that they pay for useful things like helping fund schools, filling potholes, and putting gas in the tank of the patrol vehicle. At least at the local level, we can see where our taxes go. Local taxes are necessary if we want communities with roads and schools and public safety.

But if you pay local sales or property taxes in Alaska, chances are you’re covering the cost of a business or neighbor who isn’t. Mandates from the state for exemptions and special assessments for some comes at the expense of everyone else. This isn’t due to a decision made by your local City Council or Borough Assembly. Instead, it’s the result of the Legislature passing laws that mandate exemptions, which shift the tax burden from a small group of interests to everyone else.

When local governments decide on property tax exemptions, they can balance their budgets and make decisions that reflect the needs of the entire community. Local exemptions are often time-limited, as opposed to state-mandated exemptions, and are offset by local budgeting decisions that account for each community’s circumstances.

State-mandated exemptions are a one-size-fits-all approach that comes without consequences for the state’s budget, depending on the will of appropriators. There’s no fiscal analysis performed to determine the cost to local taxpayers and businesses, no evaluation of local tax base and budget burden. And even when there’s a statutory requirement for the Legislature to reimburse local governments — to the tune of more than $100 million annually — this hasn’t been funded in decades.

Ultimately, the state doesn’t have to manage the impact of exemptions. Local taxpayers do. The needs of residents don’t go away, the obligations of local governments to fund certain state requirements don’t change, and budgets are hard-pressed to keep up. In many ways, every exemption the state passes in law is a tax increase for many. They often result in increased dependence of local governments on the state, too, for operational and capital expenses that could have been paid for if the exemptions weren’t in place.

Take, for example, legislation passed in the last session, with promises of lowering costs for food, energy, housing, or fostering economic development. While these issues are undeniably important, state-mandated exemptions have a troubling side effect: they relieve one group’s burden by increasing it for everyone else, all without costing the state anything. Most of the exemption proposals are well-intentioned to solve the challenges facing Alaskans — housing shortages and high costs, or food and energy security — but these issues are best solved at the local level, with the state and federal government providing resources in support.

The truth is that these decisions are rarely examined for their broader impact. In many communities, state-mandated exemptions have removed, on average, 20% of the local tax base. That means property owners are paying as much as 20% more than they should be to make up for lost revenue. Alaska’s tax base is already extremely limited, and is diminishing in some ways, even without these additional exemptions.

Alaska taxpayers are picking up the slack for those few who the state believes should pay a different share. The Legislature continues to pass bills that erode local governments’ ability to fund critical services, further dampening economic growth. What’s worse, there is no accountability for whether these exemptions actually achieve their intended goals and often are proposed with little evidence that they will work as intended. Meanwhile, local governments are left scrambling to make up the difference, with fewer tools and higher taxes for those who remain.

When you hear about another effort to eliminate a tax for one particular group or another, remember this: Someone else will be paying more, and that someone could be you. For the families and workers Alaska needs to attract and retain, this is a poor message: higher taxes for the majority so that a few can benefit.

Issues like food, housing, and energy security can’t be solved by limiting the ability of local governments to be effective partners. Local governments are already hard at work finding ways to invest in their communities without having to unfairly shift costs to residents and businesses who aren’t benefiting from the exemption. The state can play an important role in delivering effective investments, too, and bring state and federal resources to the table so that all benefit.

Nils Andreassen is the executive director of the Alaska Municipal League.

The views expressed here are the writer’s and are not necessarily endorsed by the Anchorage Daily News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)adn.com. Send submissions shorter than 200 words to letters@adn.com or click here to submit via any web browser. Read our full guidelines for letters and commentaries here.