The proposal presented by our governor and some in the Legislature leveling a statewide sales tax on all Alaskans defies logic. Nor does it even make horse sense.
The governor appears to support a $2,700 Alaska Permanent Fund dividend. Some in the Senate propose a $1,300 dividend. If the $2,700 dividend were to be approved by the Legislature it would create a $600 million deficit. That is about what the governor would need to come from his sales tax proposal to fund his higher dividend. So, the sales tax proposal funds the difference, and it comes from the pocket of every Alaskan on virtually every purchase he or she might make.
Some suggest that this increased sales tax funds a bigger dividend. Yet it’s collected over the course of a year from each and every Alaskan. And the PFD is taxed as income. So, is it really free money? Clearly most Alaskans understand and oppose the tax because we would get a much bigger bang for the buck by investing in Alaska’s future through increased funding for education.
Further, the application of sales tax traditionally belongs exclusively to municipal governments. The tax rate usually ranges from 2-8%.
It’s been pointed out that if the federal government can carry a deficit, why can’t the state? First, unlike the federal Constitution the State Constitution requires a balanced budget. Second, the federal government can print money. And that causes inflation that we now know too well.
The permanent fund was designed to be the principal State savings account and source of income to run State government operations. Non-recurring revenue from oil taxes should be used to meet the State’s obligation to grow the permanent fund for the future needs of Alaskans.
Money for the dividend was meant to be sized after State government services obligations had been met. That remains the case — only a portion of the fund’s earnings should be allocated to the dividend after State services are funded.
Further, to withhold school funding and to add a state sales tax to fund the shortfall caused by an overly generous dividend is certainly contrary to the intent of those who drafted the permanent fund’s enabling legislation. It is fair to say that our late Gov. Jay Hammond would say simply “it just doesn’t make horse sense.”
Frank Murkowski is a former U.S. senator and the eighth governor of Alaska.