Future of the Alaska Dividend in the balance during oil tax fight


The future of Alaska’s small basic income guarantee, the Alaska Dividend, is in the background while a fight is going on over the state’s oil tax policy.

The Alaska Dividend is a small basic income guarantee financed out of the Alaska Permanent Fund (APF), a pool of investments, accumulated from savings from Alaska’s state oil revenue. The future financing of the Alaska Dividend is indirectly related to all state government financing, for two reasons. First, if tax revenue ever falls short, the government could dip into the APF to finance state spending instead of the dividend. Many experts think the government is very likely to do this if and when oil revenues run short. It has in the past done so in surreptitious ways. For example it gives the penal system dividends for each prison inmate to help pay the cost of incarceration. Second, when revenue is high the state can (and often does) add either to the fund or directly to the dividend.

Referendum sponsors submit petition booklets to the Division of Elections on the July 13 deadline. (Vote Yes -- Repeal the Giveaway/Facebook)

Referendum sponsors submit petition booklets to the Division of Elections on the July 13 deadline. (Vote Yes — Repeal the Giveaway/Facebook)

This spring, the Alaska state legislature passed—and the governor signed into law—a bill to greatly reduce taxes on Alaska’s oil industry, claiming that it will stimulate greater oil production in the state. The hope of greater oil exports comes at an enormous cost. The new law reduces taxes on oil to 20 to 25 percent below the international average. Oil taxes account for most of the states income, and because of this bill the state budget will go into deficit spending for the first time in years. Yet, the bill has no provisions requiring oil companies to increase production to get the cuts. The oil companies get an unconditional increase in their share of revenue, and Alaska residents get oil the hope that oil companies might respond by increasing production.

A petition movement, called “Vote Yes — Repeal the Giveaway,” has begun in the state to force a vote to repeal the tax cut. The movement has turned in nearly 50,000 signatures to state authorities. If the state certifies that at least 30,169 of the signatures are valid, a referendum on the issue will be held in August of 2014—eight months after the law goes into affect.

Bella Hammond, former first lady of Alaska and widow of Jay Hammond, the father of the Alaska Dividend, has campaigned and written editorials in favor of repealing the cut. She and several other commentators argue that the cut is a significant threat to the future of the Alaska Dividend.
-Karl Widerquist, Cru Coffee Shop, Beaufort, NC July 31, 2013

For more information, see the following articles and opinion pieces about the issue:
Hammond, Bella, “My Turn: Protecting our legacy and future,” the Juneau Empire, June 19, 2013.
Gutierrez, Alexandra, “Oil Tax Referendum Meets Ballot Requirements,” Alaska Public Radio Network, July 29, 2013.
Dischner Molly, “Parnell spares budget vetoes, signs SB21,” Morris News Service – Alaska, May 29, 2013.
Forgey, Pat, “With stroke of governor’s pen, Alaska back in deficit spending,” the Alaska Dispatch, May 21, 2013.
Metcalfe, Ray, “Give away Alaska’s fair share of oil wealth, give away Alaskans’ PFD checks,” the Alaska Dispatch, May 20, 2013.

About Karl Widerquist

Karl Widerquist is a Visiting Associate Professor at Georgetown University School of Foreign Service in Qatar. He holds a Ph.D. in Political Theory from Oxford University and a Ph.D. in Economics from the City University of New York. He is coauthor of Economics for Social Workers and coeditor of the Ethics and Economics of the Basic Income Guarantee. He has contributed to journals such as Politics, Philosophy, and Economics; Political Studies; and the Eastern Economic Journal.
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