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In funding state services, reduce the PFD, don’t institute a tax

  • Author: Tim Shine
    | Opinion
  • Updated: May 16, 2019
  • Published May 16, 2019

The Alaska Capitol in Juneau, photographed on January 16, 2017. (Marc Lester / Alaska Dispatch News)

In his treatise “The income tax: Root of all evil,” Libertarian intellectual Frank Chodorov laid out the case for why Alaskans should be proud to have shed the yoke of this insidious tax. By substituting resource taxes for the confiscated personal wealth of its citizens in the funding of services, Alaska’s state government chose a better path than the federal government. It is disturbing, therefore, to hear recent clamor for a return to the detestable tax. If it returns, it will never again go away.

Especially egregious would be pairing the tax with the Permanent Fund dividend. This selective “clawing back” from working people would clearly amount to income redistribution, a basic tenet of the far left, from Karl Marx to Barack Obama. It would make Alaska state government complicit, and should be rejected out of hand.

To their credit, Gov. Mike Dunleavy and the Legislature seem to be pushing back on the tax idea. But I believe prioritizing the PFD over essential state institutions and services is misguided. Draconian efforts to downsize government, justifiable as they might seem, are likely to do more harm that good. Emptying state coffers to curry political favor ignores larger responsibilities, and will exacerbate rather than eliminate mistrust of government in the long run. The better course would be to use Permanent Fund earnings to fund government, as originally envisioned, when oil revenues fell off.

An arguably well-intentioned group, spearheaded by the progressive coalition, has ironically seized on the term “regressive” when objecting to equal reductions to the PFD across the board. Because the impact on the poor seems greater than on the rest, they deem the practice unconscionable. But unlike property and sales taxes, rents and much else, a smaller PFD is not an expense at all, just less unearned income. It should not be subjected to stand-alone analysis of beneficial effect. It is, and should remain, an expense for the state that is balanced against all other needs in yearly budgeting, then portioned out equally, if at all. Legislators must decide this; it is what they are paid for. And one Legislature must not tie the hands of another.

If lifestyles that were viable prior to the introduction of the PFD are no longer so without it, as some imply, what does this say about our societal structure?

Are we creating an artificial reality? A socialist experiment? Many reject the charge that we are “freeloaders” and are, in fact, willing to give up part or all of our PFD to fund essential state services. It is simply wrong to be branded heartless if we urge that the burden falls equally (in dollars) on all who would otherwise receive the free handout.

Much has been made by some about Alaskans’ lack of “skin in the game” when it comes to funding government. Shifting of PFD dollars to the operating budget changes that. And if a decreased PFD hurts rural people more, so does the lack of their much costlier essential services that would be eliminated otherwise.

Failure to fund essential state institutions and services would be an immoral abdication; trading a full PFD for the income tax would be a Faustian bargain. The remaining solution will require political courage and personal sacrifice. This last must come from the many, not the few. Ratcheting back the PFD payout, as has happened in recent years, is the simplest, most cost-effective and fairest way. There is the hope that fortune will restore it. And the tragic option of permanently punishing our already federally overtaxed working people would be avoided.

Tim Shine is a longtime Alaskan and retiree who lives in the Wasilla area.

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