Legislature has better tools than income tax to address deficit

  • By Peninsula Clarion Editorial
  • Saturday, May 6, 2017 10:30pm
  • Opinion

Should the Alaska Permanent Fund dividend program be considered government assistance?

It’s a crucial question to ask right now, because one of the main arguments for an income tax is that a reduction in the dividend has a greater impact on lower income Alaskans.

Yet most Alaskans will argument vehemently that the Permanent Fund dividend is not welfare.

The measure in question, House Bill 115, narrowly passed the House and currently is working its way through a skeptical Senate. It would institute the first income tax in Alaska since 1980, when revenue generated from the oil industry made an income tax unnecessary.

As part of its plan to address the state’s deficit, the House also has proposed to restructure the way in which Permanent Fund earnings are used, allocating a portion to pay for state government. The Permanent Fund dividend would be capped at $1,250; revenue generated by the income tax, among other measures, would be used to close the remaining gap.

The Senate’s plan also includes use of Permanent Fund earnings to address the deficit, capping dividends at $1,000 for the next three years, and further narrows the gap with deeper proposed cuts. The Senate would draw on some savings in the next few years for a portion of the budget, which members of the Senate say will ensure that lawmakers continue to rein in spending.

There aren’t too many Alaskans — ourselves included — who like the idea of missing out on a Permanent Fund dividend of potentially $2,000. But when weighed against the alternative of also paying an income tax, we just don’t agree with the reasoning involved in paying out money to all Alaskans, then taking a big chunk of it back from those with other sources of income.

That brings us back to our initial question about the Permanent Fund dividend program. Over the decades of its existence, a wide range of arguments have evolved over its purpose. Guaranteeing income for low-income Alaskans is rarely among them — yet that’s the intent of the House’s income tax proposal, to preserve the dividend by taxing higher earners.

A dividend, by definition, is a share of the profits paid out to stakeholders — in this case, Alaska residents. Companies pay out dividends only after covering expenses; it would seem reasonable for Alaska to do the same.

As Sen. Peter Micciche has said on numerous occasions, Alaska doesn’t have a revenue problem, it has a cash flow problem. We know that cuts alone don’t fix the problem, and we know it will be years until oil prices and production levels return to a point where they generate enough revenue to sustain state government — if they do at all.

Given those realities, we encourage lawmakers to use the tools already at their disposal to fix the problem before saddling working Alaskans with an additional burden.

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