State sales tax to cover larger PFD is a bad idea, distracts from real needs

The support from our governor and some legislators for levying a statewide sales tax on all Alaskans defies logic. Nor does it even make horse sense.

As the Legislature enters its final days, the governor says he supports a $2,700 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 an estimated $600 million budget deficit. That is about what the governor would need to raise from a sales tax to fund his higher dividend.

That tax would come from the pocket of every Alaskan on virtually every purchase he or she might make. If a larger dividend is funded even indirectly with a new tax, is the PFD really free money?

Clearly most Alaskans understand and oppose a sales tax and larger dividend 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 a sales tax traditionally belongs exclusively to municipal governments, where the tax rate ranges from 2% to almost 8%.

To withhold adequate school funding and to add a state sales tax to fund the state budget shortfall caused by an overly generous dividend is certainly contrary to the intent of those who drafted the Permanent Fund’s enabling legislation — which was to save non-recurring oil revenue to grow the Permanent Fund for the future needs of Alaskans. That remains the case — only a portion of the fund’s earnings should be allocated to the dividend after state services are funded.

It is fair to say that our late-Gov. Jay Hammond would say of a state sales tax to cover a larger PFD: “It just doesn’t make horse sense.”

Frank H. Murkowski