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We Build Alaska

Brad Keithley’s chart of the week: The impact on Alaska families and economy of various fiscal options

At the federal level and in other states, the first question most ask when assessing a new revenue proposal is “where are the distributional tables.” Such tables assess what the impact is likely to be on those covered by the proposal, usually broken down into income bracket quintiles – low, low middle, middle, upper middle and the top 20%.

In sum, the tables are the analysis of “who will pay” the proposed revenue and whether the proposals create inequitable results among households.

The distributional tables also are important for determining the impact of the proposal on the economy. Because middle and lower income households tend to spend a greater share of their income than upper income households (which direct a larger share of their income to savings and investments), revenue proposals which take more from middle and lower income households tend to have a larger adverse impact on the economy — at least the sector driven by consumer spending — than those which are more balanced or take more from upper income households.

At the request of the Alaska legislature, in 2017 the Institute on Taxation and Economic Policy (ITEP) created distributional tables for various revenue options then under consideration. Using the same type of methodology, in 2016 at the request of then Governor Bill Walker, researchers at the University of Alaska – Anchorage’s Institute of Social and Economic Research (ISER) created both distributional tables and, from them, an analysis of the potential short-term impact of various revenue options on the overall Alaska economy.

The results of both studies were consistent and clear. With respect to PFD cuts, for example, ITEP concluded that “reductions in the PFD are steeply regressive, having a far larger impact on families with lower incomes. … [T]he impact on the bottom 20 percent of earners is nearly ten times as large as the impact faced by the top 20 percent.”

ISER was equally as clear. “The impact of the PFD cut falls almost exclusively on residents, and it is highly regressive, so it has the largest adverse impact on the economy per dollar of revenues raised.” In a later, 2017 supplement, ISER added, “[a] cut in PFDs would be by far the costliest measure for Alaska families.”

The ITEP study was summarized in several charts. This one compares the impact of various options across a range of income brackets. As it clearly demonstrates, PFD cuts take far more as a share of income from middle and lower income Alaska families than they do the Top 5%. While the impact of a sales tax is less dramatic, it nevertheless also disproportionately tilts against middle and lower income Alaska families compared to the Top 5%.

For those wanting a deep dive, the full set of charts and underlying data (all of which calculate the impact of raising $500 million in revenue) is available here.

Since the 2016 and 2017 studies, however, both the executive and legislative branches have largely gone dark with respect to distributional analyses. While at the request of the legislature, ITEP did one, subsequent study in 2020 on part of what became Rep. Adam Wool’s HB 37, unlike at the federal level and in other states, none of the various revenue proposals — further PFD cuts, proposed sales and income taxes — submitted in this or any recent legislature have been accompanied by a distributional analysis.

When asked “where are the distributional tables” for any given proposal, the response has been blank stares.

Why is that? Well, it’s not because they are difficult to do. ITEP, for example, has kept its hand on the pulse of Alaska households, enabling it to routinely publish over the last several years analyses of the distributional impact on Alaska families of various federal revenue proposals. See, e.g., Tax Changes in the House Ways and Means Committee Build Back Better Bill (State-by-State impacts).

And the tools incorporated in ITEP’s 2017 & 2020 studies have enabled us at Alaskans for Sustainable Budgets regularly to publish our own analyses of various proposals, including the full distributional effects of Rep. Wool’s HB 37.

Instead, we believe the reason the legislature and administration haven’t published any further analyses, not to mention separate ones for each revenue proposal as is common at the federal level and in other states, is because they don’t want to make obvious the impacts on Alaska families and the Alaska economy of what is being considered.

As we know, the legislature has relied almost exclusively over the past five years on PFD cuts, which take more, much more from middle & lower income Alaska families, and through them, have the “largest adverse impact” on the overall Alaska economy of any of the options.

For its part, the Dunleavy Administration has talked mostly about sales taxes, which are less so, but nevertheless similarly regressive to PFD cuts and, according to ISER’s 2017 study, are the “next costliest [after PFD cuts] for households with children.”

It’s easier to get away with advocating such measures when Alaskans don’t know their impact.

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.

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