The Daily Alaska empire Newspaper, January 29, 1941, Page 3

THE CAPITOL HAS THE BIG PICTURES SHOW:'PLACE OF JUNEAU STARTS TONIGHT -SET TO MUSIC! Raptureus ro- mance on the Great White Way ... with the heart- rousing rfnelodies 0 Harry Revel and /3> Walter Donaldson SHORTS Andy Clyde Comedy A liil;}il11{ M-G-M PICT We Will Go I THE PRIDE OF JUNEAU— 1 ON THE STAGE! Juneau's High Scheol Band Late COMING TEXT, 6O VERNOR'S MESSAGE in population as substantial as that which has come to us— an increase which has only barely begun—we should not et to appropriate more money to take care of the in- reased needs of an increased and further increasing popula- tion. If we are wise, we shal be able to profit immensely by this bonanza which has come and is continuing to come to us in the shape of more people and more activities. As I have said before, the growth of population has created new problems which it is necessary to meet. Present facilities, in =chool accommodations, in communications, in public utiliti in housing, in public health, in roads, in many other way which possibly were adequate for a population of fifty-odd fhousand are not adequate for a population of over 80,000. That is what our population will be before the end of this year, and from that point it will move rapidly higher. 1 know that there are those who will be inclined to say: “Let the federal government do it. We are a relatively small number of people. We can’t afford to do this, that, and the other thing. Also we are a territory, and therefore a sort of a ward of the federal government. If Uncle Sam wants to include us in the national defense program, let Uncle Sam pay all the bills.” 1 am convinced that this is not the spirit in which we| want to tackle our problems nor is it, I feel, the true Alaska spirit. Permit me, also, to point out what perhaps is not fully realized by everyone—that the Federal Government, particularly in the last eight years, has been more than gen- erous with the Territory of Alaska. (That does not mean that I shall not make every effort,’and that we should all not do our utmost, to continue to secure all federal appro-| priations possible wherever it is fair and reasonable to try to secure them.) But let us review that the federal contribu- tions to Alaska have been under this administration. Up to the end of 1940 the Work Projects Administration had spent $6,962,777. The Public Works Administration had spent a total of $5,426,552. Their predecessors, the FERA and the CWA, spent ctively $4,047,000 and $502,000, a total for those four special agencies of $17,485,860. I want to say, in passing, without any thought of political emphasis but merely as a reasoned observation, that the combination of the New Deal administration, with Tony Dimogd on the job, early and late, in Washington, has proved beneficial to Alaska to a degree that could scarcely have been dreamt of or anticipated eight years ago. And I want to add this personal note that I believe that anyone who has seen Delegate Dimond in action day in and day out in the Committee rooms of Congress, on the floor of the House of Representatives and over in the Senate Chamber and in the countless offices of the numerous Departments, agencies and bureaus in Washington can appre- ciate how invaluable and how matchless his service to Alaska has been. Apart from the seventeen million dollars distributed . four agencies above mentioned, let us note such new contributions as $2,904,000 spent in the last year in the installation of radio beam stations and air fields by the Civil Aeronautics Administration, plus the recent allo- cation of $3,000,000 for major airports to be constructed this vear. Incidental to the past year’s construction, the Civil ‘Aeronautics Administration has accepted the transfer from the Alaska Aeronautics and Communications Commission of six radio communication stations, namely Nome, Fairbanks, Anchorage, Cordova, Juneau, Ketchikan, and the beam sta- tion at Gravina Island, effecting an annual saving henceforth to the Territory of $60,000 for their operation and mainte- nance. Besides, most of the regular services of the federal gov- ernment in Alaska have substantially increased their appro- priations for the Territory. In the last eight years, the Army Engineers alone have expended in Alaska $1,717,294 on river and harbor projects which included the development of small boat harbors, or harbor improvements, in Ketchikan, Wrangell, Petersburg, Sitka, Juneau, Skagway, Cordova, Valdez, Nome and $643,620 on flood control projects chiefly in Seward and Fairbanks, a total of over two million and a quarter dollars in the territory. In Nome, the Army En- gineers continue to-spend money for dredging, having made their single largest expenditure there, $404,008 in the last cight ‘years, which brings up the total federal expenditures since the beginning of that project to $822,585—quite a sum. It is not necessary for me to go through the various federal THE DAILY ALASKA EMPIRE, 2 — lm\pmpriulinns to prove my point. Of course we expect the federal agencies which are common to the whole United Alaska as they do any other area, but I do ‘\\'ish to emph e that the Federal Government has by and |large done its part. Take the Weather Bureau for instance: | Its appropriation 12 years ago was $21,960 for Alaska. In 11932 it was $39,203. In 1940 it was $123,528 and in 1941— year it will be $292,500—fourteen times what it was 12 s eight years ago. Similarly, of Indian Affairs in Alaska [States to servi |Th years ago, nine times what it wa | the appropriation for the Office | for 1940 is over double what it was in 1930. For 1941 it reaches a new all-time high, with $1,508,000. Since this honorable body .t met this Federal agency has taken over seventeen rural | schools formerly operated and maintained by the Territory, thus saving us annually the sum of $73,000. The United | States Forest Service expenditures in Alaska last year were over five times what they were eight years ago, $172,684 in 1933 as against $928,807 in 1940. We have not always gotten from Washington everything we have asked for. It is certainly no secret that we have | battled unceasingly, and at times effectively, and shall con- I tinue to see that Alaska gets its rightful share of various | appropriations, including public roads monies. However, let us grant that, all things considered, the Federal Government in the last eight years has treated Alaska handsomely. And | so, when needs arise here for which Federal fnnds are not | obtainable, it seems to me that it should be our duty as well as our pleasure to do these things for ourselves. I have been impressed, in reading through the messages of my predecessors to the legislatuYe and their annual reports, by the uniformity with which they have urged a greater | extension of powers to the Territory—a fuller form of Terri- | torial government. In his first message to the first legisla- | ture back in 1913, Governor Walter Clark so urged, and in his last report to the Department of Interior, last year, | Governor Troy so urged. With this desire T am in complete | sympathy and in comple 1 my power to speed the advent of the fullest amount of | territorial control of territorial affairs and of the fullest 'amount of territorial self-government. But I submit that |the first steps necessary in that direction and the simplest {and most direct way of achieving that desirable objective is: first, to make use of such powers as Congress has granted |us; second, to stand more and more on our own feet; and | third, to show that when the occasion arises we are able to | reach out in good old pioneer fashion, and secure for our- | selves, by our own efforts, what we need and what we ought to have. That is the way to establish our independence from | sueh remote controls as we may consider distateful or ob- jectionable and no longer justified. Taxation Studies That we can afford these things and a great many more | which our various communities need and seek is beyond | controversy. Over two years ago, long before 1 had any thought that I should be honored with appointment to the Governorship, my predecessor, Governor Troy, requested the | Alaska Planning Council to undertake a survey of taxation in Alaska. This was done and a most exc lent preliminary | study comprising 94 printed pages was ed in the late | fall of 1938. The Territory was fortunate in securing the | ices of Mr. James C. Rettie, planning technician of the esources Planning Board, attached to the Pacific Commission in Portland. That first and I think that most of you The investigation con- | | | | | | | Servi | National Ri | Northwest Planning | publication has been available, | have had the opportunity to read it. | tinued and a ‘second publication, preparec ‘;appruvcd by the whole Planning Council was issued last | month. It was evident to Governor Troy, and to ea ernors, as their messages reveal, that such tax legislation as the Territory had gradually accumulated in its statutes was | deficient in various respects in which a tax structure should | be adequate, and that we should be fully informed on this | subject so as to be able to meet any exigencies that might arise. | Believing that the more this vital subject the better, and that several views were | better than one, I asked the U. S. Treasury Department to llend an expert to make a study of Alaskan taxation. The | Secretary of the Treasury delegated Mr. Frederick C. Lusk, Assistant Legislative Counsel of one of the Treasury Department’ and one of its draftsmen on revenue bills. He came to the Territory last spring, and spent over two months here, fol- lowing a careful study of our tax legislation in Washington and continuing that study after he returned. Mr. Lusk has submitted recently a lengthy and com- prehensive report of which I am having several copies made and which will shortly be availablé to members of the legis- lature or anyone else interested. There have been other | studies by qualified tax experts. In a number of states, tax surveys have been made at considerable expense to the state involved. Alaska has been more fortunate in having several competent studies made and now available without expense to the Territory itself. | Present Tax System Even though the in addition to that whic unanimous opinion of al s experts on tax matters, Territory were without need of revenue h now comes into the treasury, the | those who have studied Alaska’s tax system—opinions arrived at wholly independently—is that Alaska’s system of tax laws is a patchwork, the complete overhaul of which is overdue. In 1939 almost three-quarters of the territorial revenues were derived from direct taxes upon the fishing and mining industries. These taxes being hased almost wholly upon gross value of the product or upon the number of units produced, the territorial revenues fall and rise with the annual variations in the salmon pack and the mineral output. Alone among all American states, territories and possessions, Alaska levies no tax for terri- torial purposes on land or other property. While most pro- fessions and some business enterprises are licensed for revenue purposes, many of our citizens conduct profitable business enterprises in the Territory and contribute either ! nothing at all or a mere $5 poll tax to maintain the territorial government under which they live and successfully pursue these activities. Even where the present laws do affect them, the methods provided by our present statutes in determining the amounts which each contributes lack scientific founda- tion. All experts agree that apart from its inequities, the revenue secured by the existing tax system is between a third and a quarter of the amount which could readily be secured from taxable sources, without the imposition of taxes unduly burdensome, and without going beyond accepted and reasonable tax .practice and rates as established else- where throughout the Union—in other words, that Alaska could easily, and without impairing its business aetivity or growth, raise from three to four times its present tax revenue, if that revenue were desired. Revision of Tax Laws Recommended A program of revision of the tax laws is therefore recom- mended for the following general purposes: (1) to provide an, equitable tax system which will distribute the burden fairly and in proportion to the ability to pay; (2) to insure a dependable flow of revenue independent of fluctuations which at present greatly vary the expected income of the territory; (3) to eliminate some of the injustices and inequal- ities which now exist; (4) to diminish some of the evils which have been allowed to develop as the result of not con- trolling our absenteeism sufficiently; (5) to rid Alaska busi- nesses and professions of the so-called nuisance taxes which, while contributing no substantial revenue to the Treasury, are a constant source of annoyance and irritation to those affected; (6) to raise more revenue. 1 propose three basic taxes: a personal net income tax, WEDN te accord; I wish to do everything |incomes on whatever scale the I 1 by l.htj staff and | er Gov- | information we could have on |/ e operators whose costs are the Treasury Department, | | | :SDAY, JAN. 29, 1941. a corporation net income tax, and a general property tax. Personal Income Tax The income tax principle is in my judgment the soundest of all tax principles. It is based upon ability to pay. It taxes those who can afford to pay in proportion to their ability to do so, and not otherwise. The taxes proposed should be and can be rioderate. One of the gr aspects of absenteeism which we amount of money that goes out of the Territory every year in the form of wages paid to non-residents. We are all famil- jar with this problem. Every spring thousands of workers come here in the fisheries and on the placers, work a few weeks or months, spend little or nothing here, and go out | with their season’s earnings virtually intact. Some of them, ineredible as it may seem, actually receive their pay after they have left the Territory. Many of them, with board ! and lodging provided by their employer, do not even expend for those necessities. It is not fair to Alaska and the Alaskans that some re of this great sum derived from the exploitation of Alaska’s natural resources is not left in the | Territory. It is therefore proposed to put a 2% tax on all incomes earned in Alaska with no exemption for non-residents, but with an exemption of $1,000 for residents who are single, $2,000 for residents who are married and an additional $400 exemption for each child or other dependent. It seems reasonable enough that the man who comes here and works for two months in the fisheries and takes out a thousand dollars shall pay the territory $20 for the special oppor- tunities which are granted him here, which are distinctly superior to those available to him “pelow.” Kor the man who earns $1500 in the course of five or six months on the placers, the modest sum of $30 will accrue to the territory. For residents, the same rate of tax, subject to the exemp- tions, might well apply with rates graduated for higher Legislature may see fit. There constitutionality of this sidents. But there eatest problems, one of those unfavorable should control, is the vast may be some question as to the differential between residents and non-re is ample ground for belief that with the special, peculiar, even unique situation created by the great seasonal influx and the almost total absence of expenditure within the Territory by this group, the courts will give this matter favorable con- sideration. A good precedent exists in the differential be- tween the present resident and non-resident fisherman’s license tax. In any event, the issue ought to be tested once and for all. Five million dollars annually in wages are paid in the canned salmon industry alone to non-residents, who have no stake here whatever and no concern with the Terri- tory except what they can take out of it during their relatively short sojourn here. The poll tax payment should be credited against this income tax payment. The tax would be collected at the source by deduction from the payroll and thus be collected with a minimum of expense. The statute can and should be drawn so that this slight and reasonable tax cannot be passed on to the employer. Corporation Income Tax | The net corporation income tax, which in my judgment |should he fixed at a flat 4%, would reach a great many businesses now paying relatively little to the Territory or | paying os on an arbitrary basis based on gross volume | of business, bearing no relation to actual income earned. In exchange for this tax, the mercantile and professional license taxes should be abolished, except where these latter are levied for regulatory purposes. In order to obviate double {taxation, a credit should be given against this territorial income tax for federal license taxes paid which accrue to the Territory. It is my belief that this tax, if correlated closely with | the federal income tax, will not involve great cost of col- |leetion and that it will furnish the fairest kind of a levy. It will ‘equitably differentiate in the mining industry between those corporations which make large profits and those which | make slight ones. It will establish a just differential betwee | are low. i At this point it is appropriate to discuss this net income | tax'in relation to gold mining. Seven years ago last fall, the federal government in- creased the price of gold from $20.67 to $35 an ounce. This was a great windfall. There are few, if any, parallels or analogies to it anywhere else in the business or commercial world in which overnight a commodity whose market was guaranteed and not subject to competition received such an increase. Let us conjecture what might have happened had the ‘President, before definitely determining on this step, called the gold operators of the nation, actual and pros- pective, into assembly, announced this as a possible action on his part and asked them what proportion of this in- crease they would be willing to return in taxes, if and when the action took place. 1 venture to say that, had this hypo- thetical situation occurred he could have secured a pledge of a substantial part of that amount. Actually, of course, no such thing happened. As far as Alaska was concerned, there was for three years no material change in its tax on gold. In 1935, with a $16,432,325 production of gold, the total territorial tax on all mining, including gold, was only $189,678—a trifle over 19. Then in 1937 a territorial tax, called a gross tax, of 39, was put on gold and platinum metals while at the same time the previous graduated net income tax, still applicable to other mining, was removed from 'gold and platinum metals. Actually it was not a 39, gross tax. With an exemption of $10,000 from 1937 to 1939, and since theft an “exemption of $20,000, what does this so-called 3% gross gold tax really mean? The enterprise which takes out $30,000 worth of gold pays actually one percent on that amount. Those who take out $40,000 pay 1%, $60,000 2%, $100,000 pays 2.4%, and 80 on up, most operators paying substantially less than 3% and only those who take out large quantities paying a sum which approaches that rate. But no one actually pays the full 3%. Now there is one basic fact about the ~extraction of minerals which is peculiar to it and fundamental. We have in the Territory a fisheries industry which takes out of the sea prod- ucts which, varingly, depending upon ' quantity and price, range’ about 40 million dollars in value each year. But that 40 million, granted the continued application and improvement of our conservation measures, will always be here. It will be here and furnish livelihood, employment and tax income, next year, the year after, and a generation hence. Not so with the minerals. Not so with gold. Every ounce of gold extracted from the rock or gravel of Alaska once gone, is gone for all time. Its extraction will never again give employment to another worker, will never pay a cent of tax to Territory or Nation. Every ounce of gold taken out of the soil of Alaska depletes the wealth of Alaska by that amount irrevocably, finally, forever. Is it not right and proper that that fundamental fact should haye appro- priate consideration? Is it not right and proper that for every ounce of gold taken out of Alaska some slight equiv- alent be left for the territory and its people? I think so. For remember, prosperous as the outlook may be at any given time, the supply is not inexhaustible. We see the evidence of that around us op every hand. Other states once booming and prosperous with mining activity have vlz‘:st areas of ghost towns and ghost camps. Alaska has them. . Take the conspicuous example of Kennecott. This was one of the several really famous mines in the history of copper. Its discovery, the construction of the railroad over glacial steams and deep mountain gorges, is one of the romances of modern business and a tribute to the enter- prise of the prospector, the engineer, the financier, Some n high and those whose costs® WHERE THE BETTER BIG P TIRHCENTURY One of the Funniest and Most Entertaining Movies You've Ever Seen! ONE OF THE BEST STORIES The Saturday Evening Post Ever Ran! ‘IT (OULD HAPPEN You STUART ERWIN GLORIA STUART RAYMOND WALBURN - JUNE GALE DOUGLAS FOWLEY - CLARENCE KOLB TONIGHT and THURSDAY WHAT A SPOT! AND WHAT A HUMAN HILARIOUS | APICTUREL N\ LAST TIMES TONIGHT —— FEATURES 2 ‘Stop, Look and Love’ and ‘Overland Mail’ $200,000,000 worth of copper was taken out in the course of a generation. What has the Territory of Alaska to show for those two hundred million dollars today? A hole in the ground? No, worse than that. It actually has a relief problem. And three towns dependent in varying degree on the activity of Kennecott are either on their way to becom- ing ghost towns or are seriously impaired. A man whom imany of you know formerly had a hotel business in Chitina. He was forced to abandon it—property which he deemed worth' $70,000—and try to start life anew elsewhere. The dividends from Kennecott went far and wide. They enriched many individuals who never saw Alaska and had no thought of ever coming here, or doing anything for the Territory; but relief payments paid for by the people of the Territory idoubled in Cordova the year after Kennecott shut down. | And whenever mines near a community, based in large part on mining, shut down, the real sufferers and the real victims are the innkeepers and the shopkeepers and the little home owners who have put all they had into these local enterprises and homes. A wiser policy in those days would have been ta levy appropriate severance as well as income taxes, which Icnul(l easily have been borne, upon Kennecott’s*production land to have invested that money in an Alaska fund for the support of our schools, to build more roads, to maintain our Pioneers’ Home. The example of Kennecott should be a warning. We are now in the fine flush of a mounting gold ! production. Now is the time to profit by our past experience. Now what would be a reasonable severance tax to place on an ounce of gold—this gold which once taken never returns? Would one dollar upon a $35 fine ounce of gold bg unreasonable? Would it be unreasonable, especially in view of the 69 1/37, increase enjoyed for seven years by the industry? Would it be unreasonable in view of the ex qi- ture in that same period of over a third of the territorial tax income received from mines, in roads and other aids directly beneficial to the mining industry? Certainly one dollar severance tax for the Territory on a $35 fine ounce of gold seems very reasonable. Well that dollar an ounce is the 3% so-called gross gold tax. Only let us henceforth not call it and not consider it as a gross gold tax. Let us call it, and consider it, a severance tax. Let us consider it a tax which h'as no relation to costs, income and profits, but which is [fl.lmply a repayment to the Territory, to a very slight frae- ;poym! degree, for a natural asset irrevocably removed. But if it is a severance tax, if it is a tax of approximately one dollar on each $35 fine ounce of gold taken from the ground, then let it be paid on every ounce of gold that is extracted. 4 Do you realize how much gold, under the $20,000 exemp- tion, is actually leaving Alaska without being taxed? It is not possible to give this figure with absolute accuracy. We know that in 1939, 180 operators, who did pay a gold tax to the Territorly, removed $3,600,000 worth of gold on which they were not liable to a tax. Of the more than 600 smaller operators, who' could, under the present law, remove up to $20,000 without paying any tax to the Territory, it is highly probable that they took out upwards of $1,000,000. The Ter- ritorial Department of Mines ‘estimates that over $4,600,000 of gold was taken out without tax in the year 1939. For the yedr 1940 the Department estimates that over five million dollars will have been taken out without paying a cent to the Territory. And it is gone forever! Clearly, this is not right. It seems to me reasonable and proper that we should continue as a matter of course our resent 3% tax which we may roughly consider a dollar for each $35 fine ounce; and that we should (after these seven years of exemption) abolish the exemption, making it a true severance tax, and then tax the profits of mining by the proper device of a corporation income tax based on net in- come, at a rate which I have suggested be 4. This, I view as a reasonable and moderate proposal, which will give the Terri- tory some participation, and will in no sense burden the industry. General Property Tax { Alaskans who live in incorporated towns pay general propgrty taxes, the rate of which varies between 10 and 20 mills; by law it cannot exceéd 20 mills. Alaskans who live outside these incorporated towns pay no property tax. Their number is increasing. Highways are provided for their con- venience; transportation is provided for their children to modern schools largely maintained by the Territory. Out of public funds tuition is paid for these children by the Terri- tory; in short all of the services provided by the Territory for the urban taxpayer are extended to the rural non-tax- payer. This is an unjust discrimination against those who live inside incorporated towns. A territorial property tax which is limited by the Organict Act to 10 mills—certainly not an excessive rate—would go far to equalize the present unjust disparity. This territorial tax would be refunded to the residents of the towns who are already paying a property tax. The refund could be accomplished in several ways. While this statute should be broad enough to apply to all types of land and interests therein, certain classes of property may well be exempted from taxation. Intangible personal property should be exempted partly because of the difficulties of collection and partly because a tax on personal income would seem a far more equitable way of reaching the proceeds of such intangibles. = Likewise the taxing of household goods and furnishings of the home owner seems undesirable; we should encourage thé improvement of homes and their furnishings. The property of charitable and relig- jous organizations should of course be exempted. - : A second great value of this property tax would be to permit the recovery of a vast expanse of patented land and (Continued on. Page Pive) ..... ——