One of the things that has intrigued us most over the years is the extent to which the economic interests of most of Alaska’s legislators diverge from middle and lower-income Alaska families, which combined comprise 80% of Alaska households, when it comes to the revenue (tax) approach the legislators take when in Juneau.

We have previously written about the issue a couple of times. The first was in late 2021, toward the beginning of our time writing these columns, when we broke down the then-legislators by income bracket. As we said at that time:

So, if PFD cuts have the largest adverse impact of all the options on 80% of Alaska families and the overall Alaska economy, why, over the past 6 years, has the Alaska Legislature used them not only first, but exclusively to raise the additional funds necessary to balance the budget?

To us, one answer — and perhaps the most important — is to look at the breakdown of the Alaska Legislature by income bracket. …

Forty legislators — fully two-thirds of the Legislature — fall in the Top 20%, from whom PFD [Permanent Fund Dividend] cuts take the least of the three options. And of those, twenty-two — itself more than a third of the Legislature — are in the Top 5%, from whom PFD cuts and sales taxes are the two lowest cost options.

Our second column on the issue was in early 2024, near the beginning of that year’s legislative session, when we specifically looked at the then-members of the House Finance Committee as they began considering various revenue bills. As the title reflected, in that piece we asked, “Is the fact that legislators live in a much different economic world than 80% of Alaska families leading to deep PFD cuts?”

We concluded that it was. Recalling that was the session that began with many legislators expressing concern about the outmigration of working-age, working-class Alaska families, we wrote this:

If legislators are as truly concerned as they claim about the overall Alaska economy and Alaska families, all of those factors should lead the Legislature to reject, or at least moderate, the continued use of deep PFD cuts as a funding source and focus instead on one or more of the alternatives.

But they haven’t. So, why is that?

We’ve come to believe that part of the reason is as simple as the fact that the legislators deciding to use PFD cuts don’t feel personally what the 80% of Alaska families living in the middle- and lower-income brackets face.

Building on the House district-by-district database we developed for our column two weeks ago, we are taking another look at the issue in this week’s column, this time by comparing each legislator’s own economic interests to those of the average household in the legislator’s district. We have also expanded our database to include Alaska’s Senate Districts.

The analysis is eye-opening. In the column two weeks ago, we compared the impact on the average household in each House district of using a broad-based flat tax to raise the same amount of revenue as is currently raised through PFD cuts, with the impact of using PFD cuts alone. This was our conclusion:

In short, the median income household in 80% of Alaska House districts – and from the perspective of the Governor, the statewide median income household overall – would be better off economically using a flat rate tax of some sort than PFD cuts to pay for the costs of state government. While the median income household in the remaining 20% of Alaska House districts – the state’s wealthiest – might contribute a bit more, the percentage increase would be far less than the improvement realized by the vast majority of the state’s households; most importantly, those in the remaining 20% would be required to contribute no more as a share of income than anyone else.

As we demonstrate in the following charts, the impact on individual legislators in most districts of using PFD cuts, however, is starkly different from the impact on the average household in those districts. 

While the average household in 80% of Alaska House districts would be better off economically under a flat-rate tax of some sort than under PFD cuts, the same is true for only 2 of 40 members of the House. Put differently, while 80% of Alaska families would be better off with the state using a flat tax to raise revenue, only 5% of House legislators are. Conversely, while only 20% of Alaska families are better off using PFD cuts, 95% of House legislators are.

The Senate numbers are largely the same. Similar to the House, the average household in 15 of the 20 Alaska Senate districts (75%) would be better off economically if the state used a flat-rate tax to raise revenue instead of PFD cuts. The same is true for only 1 of the 20 Senators themselves. In short, while looking at the data by Senate district, 75% of Alaska families would be better off using a flat tax, only 5% of Senate legislators are. Conversely, again looking at the data by Senate district, only 25% of Alaska families are better off with PFD cuts; 95% of Senators are.

Here is the breakdown by House district (as before, for those who want a quick way to match district numbers to the names of the representatives, can use this link to the Legislature’s website):

We explained the red and blue bars in our earlier column. In brief, the blue bars show the impact, as a share of income, on all Alaska households from raising the same amount of revenue as this year’s PFD cuts by replacing them with a broad-based flat tax. The effective tax rate (impact as a share of income) would be 4.13%. 

In the districts with red and blue bars, the number at the top of each bar —the total of the red and blue —represents the impact on the average (median) household in each Alaska House district from using PFD cuts. So, for example, the impact, as a share of income, of using PFD cuts on the average household in House District 39—the farthest to the left—is 9.4%.

The red bar shows the reduction, as a share of income, in the level of “government take” from the average household in each district that would result from changing the way the Legislature raises revenue, from PFD cuts to a broad-based flat tax. The average household in 32 of the 40 House districts would see a reduction. Again, using House 39 as the example, government take, as a share of income, on the average household in the district, would fall from 9.4% with PFD cuts to 4.13% with a broad-based flat tax. In short, the level of government take, as a share of income, would fall by 5.2% for the average household in that district by replacing PFD cuts with a broad-based flat tax.

Instead of red, 8 of the 40 House districts have yellow bars. The average family in those districts, 20% of the total, would see an increase in government take under a broad-based flat tax rather than PFD cuts. The bar shows the level of the increase as a share of income. Using a broad-based flat tax, however, none of the households in those districts would experience a higher government take than any other household in any other district.

The points within each district along the dark yellow line reflect the impact on that district’s House member of using PFD cuts. In calculating the impact, we have started with the member’s income as reported by them in the most recent Public Official Financial Disclosure (POFD) filed by the legislator with the Alaska Public Offices Commission. The income reported by members on the POFD forms is a range. We have used the midpoint of each member’s range.

To that, we have added the amount the member’s household would have received if the full statutory PFD had been paid, then divided the PFD cut by that sum to determine the impact as a share of the legislator’s overall household income. For example, again looking at House District 39—the farthest to the left—the impact of using PFD cuts on the representative from that district is a mere 1.4% of income, much, much, much less than the impact on the average household in that district of 9.4%.

Strikingly, looking across the entire chart, the impact on the legislator in every district in the state from using PFD cuts is less than the impact on the average household in that district. The closest the impact on the member comes to the average household in that district is in House District 6, where the impact, as a share of income, of using PFD cuts on the member is 5.2%, compared to 5.4% on the average household in that district. House District 8 is also relatively close. The impact, as a share of income, of using PFD cuts on the legislator from that district is 4.0%, compared to 4.4% on the average household in that district.

More are like House District 37, however, where the impact, as a share of income, of using PFD cuts on the member is less than half the impact on the average household in the district.

As we noted previously, the other striking takeaway from the analysis is that while the average household in 32 of the 40 House districts (80%) would see a reduction in the level of government take from using a broad-based flat tax instead of PFD cuts, only two of the legislators (House Districts 6 and 38) would see a similar reduction. Two more (House Districts 8 and 36) would be close, but the remaining 36 House members (90%) would see an increase from replacing PFD cuts with a broad-based flat tax.

In other words, while replacing PFD cuts with a broad-based flat tax would be economically beneficial to the average family in 80% of the state’s House districts, it would have a financially adverse impact on 90% of the House members. That’s a huge, conflicting disparity.

Here is the same breakdown by Senate district (here is the link to match Senators’ names to the districts):

The total number at the top of each bar, the blue, red, and yellow bars, and the points on the dark yellow line, represent the same as on the previous chart of the House districts. The impact of using PFD cuts on the senator from District N is so small — less than 0.1% — that it doesn’t show up on the chart at the scale we are using.

As with the House, the impact on the Senator in every district in the state from using PFD cuts is less than the impact on the average household in that district. The closest the impact on the member comes to the average household in that district is in Senate Districts A and Q, where the impact, as a share of income, of using PFD cuts on the member is within one percentage point of the average household in those districts. Compared to the House, they aren’t very close, though. The members of both House Districts 6 and 8 are each within 0.5 percentage points of the average household income in their respective districts.

Other than for Senate Districts A, Q, and T, the impact, as a share of income, of using PFD cuts on the Senators from the remaining 17 districts (85%) is less than half that on the average household in their district.

As with the House, the other striking takeaway is that while the average household in 15 of the 20 Senate districts (75%) would see a reduction in the level of government take from using a broad-based flat tax instead of PFD cuts, only one Senator (Senate District T) would see a similar reduction. Every one of the remaining 19 Senators (95%) would see an increase.

Some argue from this data that many members of the Legislature are intentionally elevating their own and their Top 20% donors’ self-interest above that of their constituents by continuing to vote to use PFD cuts, rather than other, much broader-based approaches, which would have a significantly lower impact on the 80% of Alaska households falling in the middle and lower-income brackets but a higher impact on the members.

We don’t go that far. But, indeed, those continuing to vote to use PFD cuts to fill the state’s deficits rather than other, much broader-based approaches are largely voting for an approach that favors their own and their Top 20% donors’ economics over those of the vast majority of Alaska families. And over time, we have become convinced that they continue to vote for PFD cuts, knowing that is the impact. 

For the present, we continue to believe, as we expressed in our prior columns, that such voting patterns are the consequence of the legislators living at income levels and in donor (and lobbyist) circles that significantly distance them from the economic situation facing the 80% of Alaska families in the middle and lower-income brackets.

But while we are not yet prepared to say that they are doing so for the explicit purpose of favoring their own and their Top 20% donors’ interests over those of the vast majority of Alaska families, the result is the same.

By using PFD cuts, middle- and lower-income Alaska families are contributing more—and, in many cases, much more—as a share of income to cover government costs than they would under a broad-based flat tax. At the same time, their legislators, their legislators’ donors, and others in the Top 20% —along with non-residents and oil companies —continue to contribute significantly less.

At the very least, the voting patterns suggest the appearance of self-dealing.

Brad Keithley is the Managing Director of Alaskans for Sustainable Budgets, a project focused on developing and advocating for economically robust and durable state fiscal policies. You can follow the work of the project on its website, at @AK4SB on Twitter, on its Facebook page or by subscribing to its weekly podcast on Substack.