Sunday, April 22, 2018

Alaska's legislators adopt fiscal measures that are better for themselves than other Alaskans ...

Consistent with the way in which we have watched the Washington Post and others cover proposed tax and other fiscal legislation at the national level, over the course of the last week we have put together an analysis of the economic impact of PFD cuts -- Alaska's equivalent -- on Alaska's legislators compared with their constituents.

The results are startling. The level of PFD cuts passed by both the House and Senate this session ($1100 per Alaskan) will reduce the income of a middle income Alaska family of 4 by nearly 8%. No legislator, on the other hand, will experience anywhere near the same impact.

The largest impact on a Senator, for example, is only 2.74%, more than 3 times less. The average on all Senators is only 1.34%, nearly 6 times less.

The cut reduces the income of one Senator who has been a leading advocate for the measure by only 0.27%, nearly 30 times less than the impact on a middle income Alaska family of 4. The cut reduces the income of the Senate Majority Leader, who last year suggested that he was a Profile in Courage because of his support for such a measure, by only 1.13%, or nearly 7 times less than the impact on a middle income Alaska family of 4. What he really was proposing, it seems, is that someone else take the economic bullet, not him.
The results in the House are roughly the same. The largest impact on a House member is slightly higher, at 5.88%, but that is still 25% lower than the impact on a middle income family of 4. The average impact on all House members is only 1.38%, almost exactly the same as the average impact on Senators.

The cut reduces the income of the Co-Chair of the House Finance Committee, the leading advocate of the measure on the House side, by only .39%, or roughly 25 times less than the impact on a middle income Alaska family of 4.

In short, in responding to Alaska's current fiscal situation, whether intentional or not a majority of the members of both bodies in the Alaska legislature are looking out for themselves first, and pushing the costs off on those lower down the earnings ladder.

In our view, Alaska's legislators should be required to contribute the same toward the costs of government as every other Alaskan. After all, legislators are the ones that create those costs. They should have to deal with the consequences to the same extent as everyone else.

As Governor Hammond said in Diapering the Devil
... the best therapy for containing malignant government growth is a diet forcing politicians to spend no more than that for which they are willing to tax.
That doesn't work, however, if legislators are able to adopt an approach which lets themselves largely off the hook while they pass the costs on to others.

What Governor Hammond meant was "a diet forcing politicians to spend no more than that for which they are willing to tax themselves."

As we have discussed previously on these pages, a broad based flat tax designed to treat all Alaskans the same would do exactly that. To raise the same amount of revenue as the legislature proposes to raise through PFD cuts all Alaskans would contribute roughly 2.75%.

The legislature's approach, on the other hand, let's them get away with paying only around 1.35%, while an Alaska family of 4 in the Upper Middle income bracket pays 4.68%, an Alaska family of 4 in the Middle income bracket pays 7.79%, an Alaska family of 4 in the Lower Middle income bracket pays 13.54% and an Alaska family of 4 in the Low income bracket pays a staggering 27.5% of income.

Heck, on average under their approach legislators are contributing less toward the costs of government than even an Alaska family of 4 earning the average income in the Top 20% income bracket (1.76%).

Voting for that approach wasn't a Profile in Courage; it is a vote in clear self-interest.

A chart summarizing the results of the analysis, by legislator, follows below: