Friday, August 16, 2019

A Conversation on the PFD

Occasionally, we fall into a discussion on social media that seems to do a good job capturing the essence of the public policy debate swirling around us. The one below, with Kenai personality Duane Bannock, began with the question, “What do all (or even the majority) Alaskans agree on?”

Our response was "What do Alaskans seem to agree on? Make someone else pay for the costs of govt." 

That ended up triggering an extended exchange on the PFD which we think captures the essence of the arguments on both sides. We repeat it here for those interested.

Duane Bannock
August 14

Happy Tuesday Tie Day (late!)

The recent reversals of veto’s from Governor Mike Dunleavy is dominating the news in Alaska.

I think he’s allowed himself to be pushed into a ‘no-win’ scenario: veto everything again and increase his unpopularity or accept the defacto ‘overrides’ and be criticized for ‘caving in’

Does the recall effort play into this? Possibly. Did he have a change of heart? Possibly. I’m not close to him and I can’t really understand his published justifications.

If he was right to issue the original vetos, how can he be right now? Was it mistake to issue the original vetos? If yes, what does that say about his governing ability?

What I think is indisputable: We are a state without a unified direction. I asked this question last week and I’ll ask it again: “What do all (or even the majority) Alaskans agree on?”

Brad Keithley What do Alaskans seem to agree on? Make someone else pay for the costs of govt.
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  • Duane Bannock Brad Keithley is the PFD a social program based on need? If it were, you’d make an excellent argument. However, since we both can agree it’s not, I cannot justify giving out free cash while at the same time “clawing it back” (h/t Gov Hammond) from a select, working group of Alaskans
  • Brad Keithley Duane ... You misstate our position. We believe ALL Alaskans AND non-residents should have the same skin in paying for government.

    As Gov Hammond said, using PFDc
    uts (taxes) to fund govt "would impose what is, in essence, a reversibly graduated 'head tax' on all and only Alaskans. The poor would pay a larger percentage of their ‘income’ in taxes than would the rich; transient pipeline workers, commercial fishermen and construction workers would get off scott–free.”

    A flat tax ensures that ALL Alaskans and non-residents contribute the same.
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  • Duane Bannock Brad Keithley Here's where we fundamentally differ: "I do not deserve a PFD." If it truly were an entitlement program, I would agree with your position 100%. However, I view the check as my own October Surprise gift. I didn't work for it, or give anything for it. As such, I think Gov Hammond's view is wrong (gasp!). I disagree with your assessment that the PFD is 'income' in the same context as a paycheck. One is worked for; one is a free gift.
  • Duane Bannock (continued) And while everyone seems to think a flat tax is the 'fairest' tax, in the plans that I've seen, once deductions are factored, the so-called flat tax doesn't really accomplish anything. Low income households pay little or no tax; high wage earners pay a disproportionate share.
  • Brad Keithley Duane ... Not sure what "plans" you have been looking at. A pure flat tax is the same across the board. 

    The PFD is Alaska's version of L48 oil royalties. Many families in the L48 didn't do anything to "earn" their royalties, other than to be in the r
    ight place at the right time, but yet no one in the L48 states proposes to tax royalties differently than any other income. 

    Or think of it as an inheritance. Again, the recipient didn't do anything to "earn" it other than to be born into the right family. Again, we don't see anyone in Alaska proposing to treat inheritance income any differently than any other.

    Frankly, in our view all that is going on here is the living embodiment of Sen. Long's "don't tax me" observation. The Top 20% don't want to pay for govt and are focusing on specially taxing the PFD as a way of pushing the costs of on middle & lower income Alaska families. The rationalizations are being layered on after the fact.

    Here is what ISER said about the result. We truly are amazed when others suggest taking the road that has the "largest adverse impact" of all the various revenues options on the overall Alaska economy.
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  • Duane Bannock Brad Keithley No, I don't think "the PFD is Alaska's version of L48 oil royalties." Nor is it like an inheritance. Indeed, each of those can be based on 'right time/right place' or even the 'DNA lottery.' The Alaska PFD Program isn't based on either. It's based on me waking up in Alaska for ____ number of days per year. That's it. Rich or poor. Short or tall. Young and old, Employed an unemployed. The common denominator is: Alaskans. I disagree with your idea that the PFD is the same as 'earned income' when it's not. If I don't give you a birthday present this year, have you really 'lost' anything? We Alaskan's really need to get over the idea that we're so special that the government 'owes' us a check
  • Brad Keithley Duane ... I'll let Gov. Hammond handle that one.
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  • Duane Bannock Brad Keithley Call me a left wing liberal, but if we use those same resources, including the earning of the PF, to fund Alaska's needs (schools, roads, safety etc), doesn't that meet the state's constitutional muster? (Note: I'm no fan of the Alaska Constitution; I refer to it as a despicable document.) For the record: I and my wife will likely receive $3,200 in our October Surprise. $500.00 of it will go to our favorite charity; $2,200 will go to pay our local property (house) taxes and of the remaining $500, a portion will be set aside to pay the federal tax liability. Am I complaining? Absolutely NOT! I live in the best part of the greatest state in the most wonderful country on earth! Say this out loud with me: "I do not deserve a PFD check" (repeat as necessary)
  • Brad Keithley Duane ... Oh, that's not "left wing liberal." That position is much more "Top20% trickle down." You want the availability of public goods and services ("schools, roads, safety, etc"), but you want some one else (the Remaining 80%) to pay for them through a regressive head tax. The theory is the Remaining 80% will ultimately be repaid as the money the Top20% retains "trickles down" to those below.

    Governor Hammond had a different vision. "The dividend is capitalism that works for Alaska. In a state where locals traditionally watch in frustration as most resource wealth goes Outside, the dividend’s grassroots ‘trickle up’ distribution now accounts for the largest new capital infusion into Alaska’s local economies each year." The Remaining 80% don't have to wait for the Top20% to "trickle down" their leftovers; the Remaining 80% receives their share of the wealth from the outset.

    Commonly used public goods and services should be paid for equally by ALL Alaskans and non-residents, who benefit from them as well. That is what a flat tax does. 

    (By the way, while I am not really interested in how you dispose of your PFD, your listing proves another of Governor Hammond's points: "The dividend also increases the tax base of every community against the day when they must pick up more of the tab to fund local programs previously paid by the state -- a day already dawning as Alaska’s billion-dollar bubbles deflate.”)
  • Duane Bannock 🎶 "Round and Round..." (h/t Ratt, 2005) PFD = Free Cash. Less PFD = Less Free Cash. Less Free Cash does not equal tax...sheesh
  • Brad Keithley Yup, that's the current Top20% rationalization. But to the two-term Governor that founded the program ...
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  • Duane Bannock More Rationalization. Ask Gov Hammond this: Do kids from lower income households use more/less/same amount of school resources as high income households? Do lower income households use more/less/same amount of roads? Do lower income households use more/less/same amount of state funded social services? Would lower income households pay more/less/same amount in state income tax? Are you seeing a trend? Yet, it seems to me that your position includes: higher income households don't DESERVE to keep as much of their Free Cash as a lower income household and, instead, pay (have "clawed-back") a portion to the state. Sorry friend; I cannot rationalize that in my pea brain
  • Brad Keithley Duane ... Hahaha. You must have a horrible time rationalizing the federal income tax structure, then.

    As we said before, a flat tax treats all Alaska families the same. 

    PFD cuts, on the other hand, take more from a middle income family's income than from the Top 20%, and more from a lower income family's income than even that. Look at the percentages for each income class below. Is that the kind of Alaska you want to create, where govt is funded largely by middle and lower income families, the Top 20% contributes a trivial amount of their income and non-residents contribute nothing? We don't.
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