Bad Arguments for Taxing the PFD
By Ghert Abbott
June 20, 2018
The most popular argument is that the PFD is merely being reduced to its historical average of $1,050. The purpose of this argument is to convince Alaskans that they won’t suffer too great a loss because they’ll still be getting an “average” PFD. But this average is simply the median between the highest and lowest returns. Making the median return the new high will naturally create a newer, lower average for PFD recipients. So for Alaskans to continue receiving an average PFD of $1,050, by definition the Permanent Fund needs to be left alone.
Another common argument is that the PFD has gone below $1,000 dollars in the past and recent PFDs have been historically high. The clear implication of this argument is that Alaskans are spoiled for expecting anything greater than $1,000. This reasoning is absurd. Consider the following hypothetical: if the PFD was well below its historical average by several hundred dollars, would the legislature allocate state funds to return the PFD to its historical norm? No, of course not. But it is somehow acceptable to advocate that the state is justified in reducing/taxing any PFD that is above $1,000. So a below average PFD is a misfortune you simply have to accept, but an above average PFD is an extravagance the state government is justified in confiscating.
Finally there’s the argument that current reductions to the PFD are necessary in order to stabilize the Permanent Fund. This ignores the fact that there only needs to be a stabilization because the state government is tapping the Earnings Reserve, as opposed to raising its own revenue. But the legislature has been warned by the Permanent Fund Corporation that the current 5.25% draw has a roughly 50% chance of permanently reducing the value of the Fund by making it unable to keep pace with inflation. How very stable.
About: Ghert Abbott was born in Ketchikan in 1986 and is a graduate of Ketchikan High School and the University of Alaska Southeast-Ketchikan. He is the Democratic candidate for House District 36’s legislative seat.
Received June 17, 2018 - Published June 20, 2018
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