50/50 draw looks good

The usable earnings of the Alaska Permanent Fund should be primarily directed to pay the cost of state government.

Those of us who voted in the 1976 election that established the Permanent Fund (at least most of us) assumed that the money would be used for public purposes. Paying a large individual dividend is a public purpose of a sort, but that is not why many of us voted to establish the fund. It wasn’t on the table at the time

The Permanent Fund is public money and it should be used to fill public needs. The most pressing public purpose, of course, is to pay the cost of state government. The need for a dividend is second to that.

There are those who argue that the primary purpose of a draw from the fund should be to pay individual dividends. That, in my book is pure bull-feathers. Paying for the cost of our state government is one of the most important uses of public money. And that revenue is public money.

We have had a corporate income tax for many years and the companies doing business here have contributed billions of dollars toward public needs over the years. We had a personal income tax for many years and did away with it in 1980 when money was flooding into the public treasury from the oil boom. Since then we individuals have largely had a free ride as far as state expenses go. Dividends have ranged from $331.29 in 1984 to $2,072 in 2015.

Keeping the tax away is probably a good thing if only because it feels good. We will eventually have to reimpose a personal income tax once again. In recent years we have gotten by paying state expenses largely with corporate tax revenues because those have been large enough to cover the need — so far.

That seems unlikely to be enough for the long haul since our state revenues are unlikely to grow with the budget. And if they don’t we will be looking to increase them. The number and size of Alaska’s corporations are unlikely to make any huge jumps, so we will either have to get by on existing revenue streams or establish news ones. And that will likely include a personal income tax again someday.

The current balance in the Permanent Fund right now is a little over $80 billion and decisions are in the works over how much of that can be drawn down without permanently reducing its size. That number is presumably significant and some, including Gov. Mike Dunleavy, are arguing that the draw should be split 50/50 between paying state expenses and an individual dividend.

That 50/50 approach has a lot of appeal. For one thing when the time comes to reimpose an individual income tax, as it inevitably will, the wealthier among us would pay back their dividends in the income tax. And the attractive part is that the lower-income people would pay little or no income tax and would get to keep their dividends.

That seems the fairest option, with the usual admonition that I am an English major and my talent with numbers is right up there with my talent at oil painting.

But 50/50 does seem a good way to go. We will hear a great many arguments before the issue is resolved and hopefully the public decision will be a rational one.

Tom Brennan is an Anchorage columnist and author of six books. He was a reporter/columnist for The Anchorage Times and an editor and columnist at The Voice of The Times.