Taxes & Ponies

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Contributed by Wes Keller

Naiveté is cute, even endearing ... in children. It is embarrassing in adults. “Daddy, can I get a pony?” ... Never mind Daddy has no barn or pasture... Never mind the sweet little girl has no clue about the reality of horse-care… Never mind a pony is expensive and Daddy is already working 60+ hours a week to provide for the family. A wise parent might buy her a hamster and provide rules and see the chance to build character. A naive parent believes he can secure his daughter’s love forever if he provides the pony!

Now a quiz: Which is more naïve – for an Alaskan to defend his or her right and desire to pay taxes, or for an Alaskan to insist on getting a PFD?

The first Alaskan would seem to have no clue about the sobering responsibility of providing for a family, or about the challenge of dealing with the horse manure. These Alaskans wrongly believe we can afford the “hay, bedding and security” of the “pony” out of the returns on the investment of the permanent fund. They also naively look down on Alaskans who understand their rights of ownership to the returns from investment of the permanent fund, which were clearly intended to NOT be for horse maintenance! These Alaskans also tend to suspiciously have a reserved place at the state spending “feeding trough” with an apparent conflict of interest on this issue!

The second Alaskan seems to have no clue about the need to “fully-fund” the (entitlements) we are already committed to! They seem to be selfish because they feel they potentially “own” the returns from investment of 20% of their natural resources – especially when they point out that legislative precedent has until now paid out, virtually ALL ROI as PFDs (private, personal property) or put surplus into savings! They “naively” think they can spend their money without government help! The second Alaskan has a much more rational, defensible premise than government insiders care to admit!

It is both rational and prudent for Alaskans to insist that the founders (those who ratified our constitution) “pre-paid” our taxes indefinitely by assigning the ownership of 80% of our natural resources to be the equivalent of what would be considered tax revenue in other states! They also specifically restricted access to the remaining 20% to keep it from all being spent on balancing the budget!

Not knowing the future, the founders respectfully did not prescribe the purpose of the PF or its returns! Instead, they specifically left the task to elected policy makers (the legislature) who were (are?) supposed to “hold the purse strings”. Wisely, the legislature created an investment system that has been successful beyond dreams. They also faithfully reinvested portion of surpluses back into the PF corpus (inflation proofing) and created a mechanism to pay out dividends to the sovereign investors, the “owners” of the resources by way of annual permanent fund dividends (PFDs).

• They likely never envisioned a legislature effectively segregated from the sovereigns.

• They arguably could not anticipate the fiscal planning impact of their experimental unbalancing of power tipped in the governor’s favor.

• They seemingly did not anticipate the impact of establishing the seat of government geographically isolated from the population.

The imbalance in the branches has empowered a very “deep state” to use slanted legal opinions to aver the PFD temporary and not subject to the same government access restrictions as the PF! This assertion is embraced by the naïve Alaskans who “want a pony”. The very same who do not willingly admit we already have several we cannot afford!

The current governor and legislature have dared to make a “down payment” (on the “pony”) with our money (a slice of our PF earnings) and now must deal with angry constituents. As sovereigns, we have the power and responsibility to replace them as needed to keep the spending restrictions on what is arguably “our” money!

If, on the other hand, you are an Alaskan who really does want bigger government, the proper way to get it is to elect legislators who will write and pass new tax legislation to pay for it. Given there are enough investment returns in savings to pay $5000 dividends for 10+ years without touching the PF itself, it may be rational to support taxing PFD income if they dare, but it must be done openly in a legitimate process. This type of tax law proposal would generate a fair comparison between the need for more spending and the need for personal income... This is the typical dynamic for states to get their revenue!

Constitutionalists can make a rational case Alaskan taxes are “pre-paid” in full by their 80% of revenue from natural resources delegated to be “utilized, conserved, and developed” for our maximum benefit. Legislators need to be reminded they have the constitutional power to tax – but not to just help themselves. Like all Americans, Alaskans would likely allow themselves to be taxed by a frugal government providing basic services.


Wes Keller |