Opinions

Guarantee Alaska's PFD -- and an income tax -- in the constitution

It's no secret that most of the politicians in Juneau look longingly at the Alaska Permanent Fund to solve the current budget crisis. That's one reason Gov. Jay Hammond wanted a dividend. Defending the dividend means defending the fund. The reality is that politicians whose election campaigns are paid for by a wealthy few don't represent the folks for whom the PFD is an important, even critical part of a family budget.

At the same time, the people are persuaded to think the income tax is an abomination, even though it is the normal source for public income and expenditure throughout the United States and has no negative effect on a large majority of the population that pays little or none.

Of course, the majority complain about the tricks and exemptions at the top. Fix those rather than begrudging a graduated income tax generally. A century ago, Americans saw clearly the importance of a graduated income tax and adopted a constitutional amendment overthrowing another U.S. Supreme Court decision designed to protect the role of wealth in the American community.

Alaskans, stripped of oil income must, through their legislators, find a way to support a trimmed state budget. You, the people, must accept the fact that taxes, such as are endured in the remaining states of the U.S., including an income tax, are a part of the deal unless you want to pay through a PFD cut, which would be a head tax on every man, woman and child in the state, a tax graduated against the poor instead of the rich.

In dealing with the current fiscal crisis, the worst, or nearly the worst thing the Legislature could do is postpone consideration so they could "think it over" for a year. With a cost of over $1 million an hour, you can see why "Are you kidding?" is an appropriate, exasperated response.

If the legislative leadership has no stomach for taxes, maybe they can throw it back to the people. Many Alaskans have longed for permanent protection of the PFD. Maybe now is the time to do it, together with payment of the price.

The Legislature can propose constitutional amendments. It can also propose legislation subject to referendum without requiring a difficult and lengthy process. Amendments are not written in stone. As with Prohibition, the people can enact and repeal the amendment, or tweak it. A few questions need to be answered in the process of preparing a proposal.

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At what level should the PFD be fixed? The most prominent solution is to take some averaging of past years. But it's not as if an average of past years, including decades of growth, reflects the reality of the fund's current, permanent capacity. No, frankly, this averaging is a trick. It is also a trick to "forget" to include an inflation factor without which the PFD will shrink away faster than the people might think.

Some argue the PFD is already so high it is attracting "lowlifes," shades of Papa Pilgrim, to Alaska, but annual population estimates do not support this hypothesis. Still, the argument has some merit. The right estimate should bear a cautious relation to the current calculation of dividend, let's say $1,800. This still leaves a substantial amount of state income from the fund to support the state's budget.

A more difficult question is how to ask the people to choose between raiding the fund or requiring income for state expenditures to come from an income tax, supported by other taxes. To do this without violating the single subject rule the Alaska Supreme Court has declared for constitutional amendments is difficult. The PFD is already mentioned in the state Constitution, but no amount or guarantee of its existence is included. A first draft of such a proposed amendment could look something like this:

The Permanent Fund Dividend shall be fixed at $1,800 per Alaska resident per annum, with adjustments made every two years to reflect the national rate of inflation. To support the Permanent Fund Dividend, a graduated income tax shall be levied by the Alaska Legislature, based on a percentage of the federal income tax starting at not less than 15 percent. This revenue shall be paid into the Alaska Permanent Fund. If the Legislature fails to act, the governor may implement this provision by executive order. The yield on the Permanent Fund shall be measured as 4 percent of its total annual value. All yield of the Permanent Fund, not required for the dividend, is available for legislative appropriation.

Only a first draft, but maybe passing the buck to the people is the right way to go.

John Havelock is a former Alaska attorney general and professor of justice at the University of Alaska Anchorage. He lives in Anchorage.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary@alaskadispatch.com. Send submissions shorter than 200 words to letters@alaskadispatch.com or click here to submit via any web browser.

John Havelock

John Havelock is an Anchorage attorney and university scholar.

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