OPINION: An even better way to balance Alaska’s budget

In a recent opinion piece on these pages, University of Alaska Anchorage economics professor Matt Berman proposed a “better way to balance Alaska’s budget.” Instead of cutting the Permanent Fund dividend, Matt would sustain it by initiating a state income tax at a flat rate, e.g., 15% of an individual’s federal tax. The PFD would be redefined as a “credit” against the state taxes owed. If the credit exceeded a person’s tax liability, the state would issue a payment for the difference. In this way, low income people would get a larger credit payment than high income people. At the extreme ends, people with very low income would get the entire credit, while very high income people would get nothing.

It’s an interesting idea, and Berman asked for other ideas if readers didn’t like his.

I like Berman’s direction, but I have a refinement that simplifies it. Let’s only pay the PFD to low income people — because the net effect of his plan is just that. This way, we save the cost of standing up an entire organization in Juneau to collect income taxes and issue credits. We could simply make the PFD “needs based” by adding “Federal Adjusted Gross Income” to the existing PFD application. Households below a certain level of income would get the entire PFD, while higher-income households would get none, or a graduated reduced amount.

Berman made the point that “A cut to the PFD is a tax — the most regressive tax ever proposed.” That’s true for low income people, but it has a far less burden for high income people. Creating an income tax so we can use a credit mechanism to take away the PFD from high income people is illogical. Let’s just take the PFD away from high income people and only pay it to people who need it to make ends meet.

Whatever funds are freed up from this change could be used for critical public services and education.

Al Bolea is a retired leadership trainer and former Distinguished Visiting Professor at the University of Alaska Anchorage. He’s also a retired oil and gas executive.

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