Updated: 5 a few minutes ago Published: 57 a few minutes ago
A recent opinion piece in the Anchorage Daily News by Carl Marrs deserves a response. The article, titled “This Year’s PFD Is Affordable, But It’s Not Sustainable,” argues that while this year’s Permanent Fund dividends “are affordable due to high oil prices,” they are not. “sustainable once oil prices return to long-term averages”. “This implies that PFDs are tied to oil prices. But that’s not what the Alaska statutes say. In place, Alaska statutes specifically bind PFD to “income available for distribution” from the income of the Permanent Fund.
We understand that in a 2017 decision, the Alaska Supreme Court said that the Governor using his veto or, by implication, the Legislature could overrule the law in any given year during the appropriation process, diverting revenue intended for the PFD to other uses. But that decision did not overturn the law, it simply said the governor could veto or the legislature appropriate the money for other purposes. Mr. Marrs’ article implied that such PFD diversions — what some call PFD reductions — are good for Alaska. But that’s not what economists who have studied the matter have concluded.
A study 2016 for the Legislative Assembly by economists at the University of Alaska Anchorage Institute for Social and Economic Research, or ISER, found that because “the impact of PFD reduction falls almost exclusively on residents, and that it is highly regressive…it has the greatest negative impact on the economy per dollar of revenue generated” of all the different financing options. A 2017 follow-up study by one of the co-authors of the 2016 study concluded that, again of all the different financing options, “a reduction in PFDs would be by far the most costly measure for Alaskan families” .
And as reported in a DNA story at the time, in a separate article study 2017 for the legislature, the Institute on Taxation and Economic Policy, aka ITEP, found that “cutting dividends from the Alaskans Permanent Fund would hit middle-income Alaskans more than three times as hard as a graduated income tax that would bring in the same amount of money….Even upper-middle-income Alaskan families—those in the top 60-80%…—would be slightly harder hit by the dividend cut.
We understand from both ISER and ITEP studies that due to the significantly lower impact on them, the top 20% earners benefit from using PFD discounts instead of taxes, and therefore strongly oppose the adoption of taxes to pay for government services.
But as the title of the 2017 DNA story reported, “for most Alaskans, an income tax would hurt less than a PFD cut.” Although not featured in Mr. Marrs’ article, members of the top 20% sometimes claim that although they are deeply regressive – meaning they affect lower-income families more strongly and middle than high-income families – PFD reductions are nonetheless justified because “low-income Alaskans are more dependent on government services.”
But we’ve never seen an economic study that demonstrates this, and it’s certainly hard to imagine in any case that low-income families in Alaska use nine times as much, lower-middle-income families use four times more, middle-income families three times more, and even upper-middle-income families twice as much as those in the top 20%. These are the multiples found by the 2017 ITEP study on the impact of PFD reductions on families in these brackets compared to those in the top 20%.
We understand that sometimes government spending – or the amount saved for future use – exceeds traditional income. We could reform spending and align the government’s budget with currently available revenues, but we have seen no political will to do so. So when additional expenses occur, all Alaskan families should be required to contribute equitably to make up the shortfall, and not, as happens by balancing the difference through PFD reductions, forcing families middle and low income to bear a disproportionate share of the burden.
While the legislature’s decision to use PFD reductions may be good for the top 20%, disproportionately burdening middle- and low-income families — the remaining 80% — of Alaskan families. , it is failing them and, as the 2016 ISER study concluded, Alaska’s overall economy.
third-generation Alaskan, Michael Dukes is the host of The Michael Dukes Showbroadcast weekdays throughout the state of Alaska on various local radio stations and via the Internet.
Brad Keithley is the general manager of Alaskans for Sustainable Budgetsa project focused on the development and promotion of economically robust and sustainable state tax policies.
The opinions expressed here are those of the author and are not necessarily endorsed by the Anchorage Daily News, which welcomes a wide range of viewpoints. To submit a piece for review, email comment(at)dna.com. Send submissions under 200 words to [email protected] Where click here to submit via any web browser. Read our full guidelines for letters and comments here.