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EDITOR, Daily News:
Those who oppose balancing regressive Alaska Permanent Fund dividend cuts with progressive taxation often proclaim some variant of “the permanent fund dividend was not meant to be welfare.”
This is true, but such an understanding is at the very core of the case for progressivity. The PFD is not welfare in that it is not the state government/taxpayer’s money. Rather, the PFD is the money paid to each and every Alaskan by virtue of our equal co-ownership of the state’s oil wealth; it is our individual share of the invested earnings from the sale of publically owned natural resources. So when the state government reduces the dividend in order to draw revenue from the permanent fund, what the state is doing is essentially placing a hefty head tax on every dividend recipient. And this defacto PFD tax disproportionately impacts people earning under $100,000 a year, taking a far greater percentage of their income than it does from wealthier Alaskans.
When contemplating the implementation of any new tax, it is prudent to take into consideration just who will be the most negatively impacted by it. If the tax’s impact is heavily regressive, substantially reducing the income of middle and lower income Alaskans while barely touching the income of the rich, then that is a serious problem. As a practical matter, such a tax would increase poverty, hamper upward mobility, erode Alaska’s consumer base, and undermine our state’s democracy. As a moral matter, such a tax would be extremely unfair, practically placing the entire burden of supporting the state government on those who can least afford it. This is why balancing the PFD reductions is essential.
Balance can only be achieved through a progressive income and capital gains tax. This would spread the burden more equally, with revenue derived from taxing the rich allowing for a lower draw from the permanent fund and reducing the financial pressure on everyone else. Any other tax system, whether it be the local sales tax increases favored by the Senate or the regressive wage tax recently proposed by the governor, would only compound the damaging inequality of the PFD tax.