Alaska can do better than subsidizing the wealthy

For the past several years, I have had the opportunity, through the AARP Tax-Aide program, to voluntarily assist lower-income Alaskans in the preparation of their federal income tax returns. I see many of the same people year after year. They receive Permanent Fund dividends. Every year, many of them begin the year impoverished and end the year impoverished.

These are the more fortunate of the lower-income Alaskans. They have jobs. Yet many fall below federal poverty level standards. Though the dividend pulls some out of poverty, the poverty rate in Alaska is 11% and rising. In Alaska, the wealthiest 5% of households have incomes nearly 11 times higher than the poorest 20%.

In their 2019 Kids Count Data Book Study on children’s well-being, the Annie E. Casey Foundation found that among all states, Alaska:

- ranked 45th in the nation on 16 benchmarks related to children’s quality of life.

- ranked 50th in health.

- ranked 49th in education.

- had the nation’s highest rate of children and teenagers dying, at 52 deaths per 100,000 people ages 1 to 19.

- had the nation’s highest percentage of teens who abuse alcohol or drugs.

- had the lowest score on fourth grade reading.

This is embarrassing. Clearly, just paying the same dividend to everyone has not solved income inequality or poverty, or the underlying social symptoms of those problems.

Like everyone, low-income people need housing, education/job training, food, energy, health care, transportation, day care for their kids, and yes, cash. Last year’s dividend of $1,600 amounted to $4 per day. But living in poverty, you cannot provide for all these needs for an extra $4/day. People need more help.

And then there are the wealthier Alaskans. The median household income in Alaska is $73,000. Half of the dividend allocation goes to those making more than that amount. Their share, their $4 per day, exceeded the amount of the governor’s budget vetoes. Many of these people do not need the dividend. The potential additional revenue capacity from wealth in Alaska is considerable.

Economic insecurity, living in fear of unemployment and scarcity, is oppressive. Care of others is an innate moral value. This embraces redistributing some share of prosperity to those in need. Notwithstanding alternative private philanthropy, the Pick.Click.Give. program only re-funnels 0.3% of total dividends.

An effective framework would be through a progressive personal income tax, rather than universal dividends, coupled with a state earned income credit (similar to federal), a boost to the minimum wage and support for those who cannot work.

Many necessities can be delivered through state programs to multiple households efficiently. The outcome would be lower-income Alaskans having more than they have now.

An income tax with dividends for everyone would be unreasonable. Taxes would have to be higher to pay for dividends. And non-resident workers shouldn’t have to pay income taxes that go toward dividends they cannot receive. (Of course, non-residents should pay for public services, just like residents should.) These workers provide useful contributions to the economy, and generally do not take jobs from Alaskans. Seafood processing has low-paying seasonal jobs in remote work sites, tourism is seasonal, and petroleum and health care often require specialized technical skills not found among Alaska workers.

The current budget dysfunction illustrates the addiction to dividends. It is a culture of taking, where in all other states, residents pay for the services and society they want. Alaska’s challenge is to address the hardship and disparity suffered amidst all the abundance.

Roger Marks is an economist in private practice in Anchorage. He formerly served as a petroleum economist with the Tax Division in the Alaska Department of Revenue.

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