The Weekly Top 3
The Weekly Top 3
The Weekly Top 3 (2.24.2025)
Welcome to The Weekly Top 3 — our look at the top 3 things on our mind here at Alaskans for Sustainable Budgets — for the week of February 24, 2025.
This week, our top 3 issues are these: 1) we discuss the Senate Finance Committee’s proposed SB109, which, if enacted, would be the largest permanent individual tax increase in Alaska’s history (2:09); 2) we explain why the source of the state’s fiscal problem isn’t either too much spending or too little revenue, it’s that we are using the wrong revenue structure (19:59); and 3) we explain why, if you look, you can see the forces behind the state’s next big spending wave starting to form (41:53).
The Weekly Top 3 is a regular weekly segment on The Michael Dukes Show. The Show broadcasts on Facebook and YouTubeLive as well as via streaming audio from the Show’s website weekdays from 6–8am. We join Michael weekly in the first hour of Tuesday’s show, from 6:25–7am, for a discussion between the two of us about our three issues.
Hi, this is Brad Keithley, managing Director of Alaskans for Sustainable Budgets. Welcome to the weekly top three the top three things on our mind here at Alaskans for Sustainable Budgets for the week of February 24th 2025. The weekly top three is a regular segment on the Michael Duke Show. The show broadcasts on both Facebook Live and YouTube Live as well as via streaming audio from the show's website. Weekdays from 6 to 8 am.
Speaker 1:I join Michael weekly in the first hour of Tuesday's show from 6.10 to 7 am for a discussion between the two of us's show from 6.10 to 7 am for a discussion between the two of us about our three issues. We post the podcast of our discussion following the show on the Alaskans for Sustainable Budgets Facebook, youtube, soundcloud, spotify and Substack pages. Also on the Alaskans for Sustainable Budgets website, as well as the project's page on national blog site mediumcom, you can find past episodes of the weekly top three also at the same locations. Keep in mind that, in addition to these podcasts during the week, you can also follow and participate in the discussion with us of these and other issues affecting Alaska's fiscal and economic condition by following us on the Alaskans for Sustainable Budgets Facebook page and through our posts on Twitter this week.
Speaker 1:Our top three issues are these First, we discussed the Senate Finance Committee's proposed SB 109, which, if enacted, would be the largest permanent individual tax increase in Alaska's history. Second, we explain why the state's problem isn't either too much spending or too little revenue. It's the wrong revenue structure. And third, we explain why, if you look, you can see the forces behind the state's next big spending wave starting to form already.
Speaker 2:And now let's join Michael Brad Keithley Alaskans for Sustainable Budgets. Good morning, my friend. How are you?
Speaker 1:You know, michael, I was coming off a great week. I had a couple of concerts. I went to a concert with an old group that I've loved for years and years and years. I'm in Chicago. I went to a concert in Boston. I was really feeling great. And then this morning I look at the bills that got filed yesterday and I think I think the introduction that you use of steaming is uh, is appropriate for me this morning.
Speaker 2:Yeah, there's some uh boy, I tell you what. And they're, they're finally saying the quiet part out loud, and I and I hate to say I told you so and they're finally saying the quiet part out loud, and I hate to say I told you so. But dang it, listeners, I told you so. I mean, they're using some of the language that we talked about here. We'll get into that with Brad Keithley, but let's get started in number one, shall we? The largest individual tax increase in Alaska history. That's what it's all about, brad. Let's get started.
Speaker 1:Well, this segment was originally going to start out to talk about what's going on on the house side with the PFD, and it was going to focus on. The segment was going to focus on the change in language we're seeing on the house side with respect to the PFD. Those who were around will remember that the whole thing with the PFD started in. The whole flippy floppy with the PFD started in 2017 when the legislative finance division changed a footnote, or changed their treatment of a footnote in the way they do the fiscal summary. That flipped the PFD from designated general funds, which means it's set off for a statutory purpose, to unrestricted general funds, which means it's open season. Use it for whatever you want to use. And that change in language the change in language from designated general fund to unrestricted general fund had a huge impact. It then justified the Senate saying well, it's unrestricted general funds, ledge Finance tells us so, although they had told Ledge Finance to tell them that. But Ledge Finance tells us so it's unrestricted general funds, so we can use it for whatever we want. We're going to use it for this, that and the other thing, and PFD that sort of comes last. Then we shifted to the language, shifted to percentages. We were going to have a 50-50 PFD or some people said we were going to have a 33. I think the Republicans on House Finance one year tried a 33-67 PFD a third of the POMB draw, and then it went to a 25 pfd. But it was always about always about percentages. A share of the the alaskans would get through the pfd be distributed through the pfd, a share of what's ever being taken from the po, from the percent of market value draw, from the permanent fund earnings. Now the house is trying to change the. The house andyson, call a name a name Andy Josephson is trying to change the language again to start talking about dollars, dollar amounts, no longer percentages. We're going to give you a thousand dollar PFD and boy aren't you happy that you're getting a thousand dollar PFD. You're lucky, you're lucky. And what that's doing is shifting the language away from the percentages. And you can.
Speaker 1:I did a. I did a cheat sheet that that you know. People can go online to the Alaskans for sustainable budgets Facebook page or Twitter page or whatever and find it. But I did a cheat sheet and the thousand dollar PFD is an 83.17 PFD, but they don't want to say 83.17 or they don't want to say 80.20 or they don't want to say 85.15. They want to start putting it now in terms of dollar amounts and say, boy aren't you lucky. And anyway, that's what this segment was going to be about. But last night, late last night, when I read the newspaper Sean McGuire's newspaper on a new bill that got dropped yesterday, and then read the bill this morning, this segment changed.
Speaker 1:What's happened is that the Senate Finance Committee has introduced SB 109, which in fact is the single largest permanent individual tax increase, permanent individual tax increase in Alaska's history. It changes the statute from the traditional POMV statute that's been in there since the early 1980s, changes it permanently to 2575, to POMV 2575. Except, it doesn't even do that because it changes the language also from the shall distribute. It's in the existing language, which the legislature has ignored and the governor signed bills ignoring. But it changes the language in the statute from shall distribute to may and it doesn't even clear up what some claim to be this conflict in the existing statute now because of the POMV statute being superimposed on top of the PFD statute. It doesn't even clear up the conflict that some claim that there's an ambiguity or there's a conflict in the statute between the amount the legislature can take for general fund, for UGF purposes, and the amount that's set aside for the PFD. It keeps that conflict inside the statute. So Burt Stedman can continue to say oh well, there's a conflict in the statute, so we have to decide. It doesn't even insure 2575. Even if it insured 2575, it would be the single largest permanent individual tax increase in Alaska's history by far. But it doesn't even insure 2575. All right, here's the part that just I blew off the planet. My mind exploded so far that I blew off the planet on. Here's the part that really set me over the edge.
Speaker 1:The co-sponsors of the bill include not only the members of the Senate majority, but they include Mike Kronk and James Kaufman from the Senate minority, who are co-sponsors from the Senate minority, who are co-sponsors to the single largest permanent individual tax increase in Alaska's history. I mean, what the hell? Why do we have a Senate minority if they're just going to roll over and go with the Senate majority on the single largest individual permanent individual tax increase in Alaska's history? There isn't even an effort in this bill, although I understand from Sean McGuire's article there may be more bills coming at the end of the week, but there isn't an effort in this bill even to have a comprehensive plan at the end of the week, but there isn't an effort in this bill even to have a comprehensive plan.
Speaker 1:You know, at times we've talked about okay, if we've got to adopt changes in the PFD, let's at least make it part of a comprehensive effort. That was the entire goal of the 2021 Legislative Fiscal Policy Working Group that Ben Carpenter and Shelly Hughes sat on to have a comprehensive plan that included changes in the PFD but also more equitable revenues. If we needed additional revenues, changes to the old tax code, a spending cap and putting the PFD in the Constitution A comprehensive plan. There isn't even an effort in this bill bill and there's no companion bills to it. The reason in an effort isn't even an effort in this bill to have a comprehensive plan.
Speaker 2:So what we, what we have is, one more time, the single largest permanent individual tax increase in Alaska's history that the Senate minority members in the in the legislature are signing off on well, the senate minority members in the finance committee, just to be clear, because I got clarification from one uh, from uh, rob myers, who said this is not the minority's position. This is these two individuals, um, but.
Speaker 1:But the two. The minority put on Senate finance.
Speaker 2:It's two of the five two, of two, of five or six. Yeah, the problem is, of course and just for clarification so everybody knows what Brad's talking about they're talking about changing the foundational statute for the PFD. It would no longer be a five year rolling average of the 21 percent%, yada, yada, yada. They basically would calculate it at the end of the year, every year, and just say here's what's left over, here's what. It is a thousand bucks, and we're taking everything else. And again, this is we've said if you want to ignore the statute, you might as well change the statute. So they're going to change it. But I was definitely not expecting this to be part of the change that they came down with, especially from. Again, I'm surprised, even if it's not the minority's position, it's not the caucus's position, I'm still surprised that two members of the caucus are out there supporting this. It really kind of blows my mind.
Speaker 1:So the minority caucus appoints two members to the finance committee. Those are the caucus's representatives on the finance committee. Those are supposed to be the caucus's voice on the finance committee, are you telling me? Is someone trying to tell us that they went rogue, that they've gone off, that Kronk and Kauffman are off in their own universe now? I don't believe that. I don't believe that they were appointed by the minority. That is the minority on the finance committee.
Speaker 1:And if someone's trying to tell us that, oh, somehow there's a different caucus position, or that it's not the caucus position or whatever, I'm not there for that. I'm not believing that, after all the effort that's gone into focusing on a comprehensive plan, after all the effort that we've talked about in terms of, in terms of main, in terms of the impact of PFD cuts on on Alaska families, in terms of the adverse impact of PFD cuts on the overall Alaska economy, after all the effort to have the two minority I mean not Bert Lyman, okay, you know. Kiel, kelly Merrick, okay, yeah, I'm sort of expecting that, but I cannot comprehend the fact that that that two, that the two minority members have have rolled into this. Co-sponsors Not, I mean, there's no asterisks, there's no. We agree to some, we, but we disagree as to others. Co-sponsors right out there, equal uh with uh with lyman and stedman, I, I just think I, you know well it's.
Speaker 2:It's beyond, beyond the beyond the edge for me, the best part is the headline for this article from sean mcgu Senate panel introduces 75-25 PFD formula amid doubts about affordability. They don't even know if that's affordable. I mean, as you pointed out, the $1,000 PFD is an 83-17. And we already know that Ledge Finance said that they did all the spending, just the general spending and the increases and everything else. We're about 90 something percent of the pomv draw to pay for it all. I mean it's, you know, it's madness. There is just, there's just no stopping it at this point.
Speaker 1:But that and that is the point. There are no breaks if the senate minority members are in on this deal. If the Senate minority has now gone in on 75-25, and it's not even, let's be clear, it's not even 75-25. It's sort of a goal of 75-25 may appropriate 25%. I mean remember this whole debate we had at one point about shall versus may. Well, they've given up on that too. Yeah no.
Speaker 1:It is it, it is. I mean there's no break anymore. No, it's just. It's just. You know, everybody's pushing right ahead yeah, they're not even trying.
Speaker 2:They're not even trying to throw the brakes on or slow things down, they're just like okay, here we go. I mean they've taken out the word distribute. Distribute I mean distribution. There's no distribution now, it's just they may appropriate it as you said. Here we go. I mean they've taken out the word distribute, I mean distribution. There's no distribution now, it's just they may appropriate it as you said. They're no longer taking out the shell transfer. They may, they could decide at any time. It's just.
Speaker 1:You know, it's astonishing, all right, Single largest permanent individual tax increase in Alaska's history and the two Senate minority members are signed on to it.
Speaker 2:Yep, brad, you should really tell us how you feel about this, because it's just, I mean, you know, look, I expected at some point we were going to have this discussion about the permanent fund formula, right, the statutory formula. I expected that we were going to have it, but I expected that it would be, you know, kind of a full caucus coming together saying, look, let's propose something that kind of protects it or enshrines it or does something, or, you know, even if it was just a you know some kind of political grandstanding, I expected them to take some kind of stand on it in that direction, instead for it to come out of house finance and basically say, oh, yeah, we're going to take it all apart and everything else, and there is no shell transfer and there's no more distribution, it's just appropriation. And yeah, yada, yada, yada. I mean I'm just like wow, they have just not only given up, they have, they're going with the full flow.
Speaker 1:At this point, they're becoming part of the steamroller I mean so so the big things, the big things that that Ben and and Shelly fought for in the legislative, in the legislative finance or the legislative working group, fiscal policy working group big things were comprehensive plan. If you're going to change the PFD, do it in conjunction with the constitution, with constitutionalizing the PFD, so we don't keep going through this every year. Do it in conjunction with a spending cap or some sort of restraint on spending. Do it in conjunction with some broader revenue measures so you get everybody involved in the game, including non-residents, the top 40% of the oil companies, 20% of the oil companies, and do it as part of a comprehensive plan. That has been the key to talking about how we're going to unlock or how we're going to deal with the PFD. To have this comprehensive plan, there's nothing, nothing. So what did the Senate minority member? If we want to play this game, it's not really the caucus, it's only the Senate minority members. So what did the Senate minority members get out of this? Nada, they just gave up. They just they, just. Why do we vote for the Senate minority? I mean, they just gave up, they just became part of the steamroller. The steamroller there. There's no indication that they got anything, anything in response in terms of a comprehensive plan in exchange for giving up on uh, giving up on the pfd, and they've just left, they just opened the door to yeah, 75, 25 maybe, if we feel like it in any given year.
Speaker 1:This is by statute. At least we have a statutory argument now. But now it's the statutory argument is going to be. Well, the statute says we can do whatever we want to. So we're going to do what we want to, just and just and just keep taking it more and more and more. What did the Senate minority members get, or for signing them onto this bill Nothing, they got nothing. They got nothing in terms of a comprehensive plan. They got nothing in terms of constitutional protection. They, in terms of a comprehensive plan, they got nothing in terms of constitutional protection. They got nothing in terms of making at least the 75-25 definitive. They got nothing.
Speaker 2:I can keep going. Now it says at the each fiscal year, the legislature may appropriate from the earnings reserve to the general fund the amount available for appropriation, calculated under this statute, to fund the dividend established under the 25 percent of income available for appropriation. It's just, it may it may. It is not even a, it's not even a shall distribute. So that's the thing they say. Well, now we're putting the 2575. No, it says may, right there, they may do it, they may decide not to do it. It's not a shall. You don't even have the argument of shall distribute or shall transfer. Now it's they may appropriate, which was how they were treating it anyway. But now you've taken out any statutory protection.
Speaker 1:It is a permanent anyway, but now you've taken out any statutory protection, it is a permanent. I mean. That's why I'm heavy hitting the word permanent when it's the single largest permanent individual tax increase in Alaska's history. We've had the largest annual increase in Alaska's history since 2017 as a result of these appropriation cuts, but this is the permanent.
Speaker 2:Angie said just because it's a committee bill doesn't mean that all the members agree, but they signed on to it, right?
Speaker 1:Oh, absolutely. It's not a committee bill. Angie, Read it. It has co-sponsors named co-sponsors, and Kronk and Kauffman are named co-sponsors.
Speaker 2:All right, hold on, hold on. How's Kronk going to explain this to his rural district? That's what I want to know. Okay, we just peeled Brad off the ceiling and so hopefully he's just a little. The problem is the revenue structure is what Brad says. Now, my argument has always been because it always used to be, brad, I remember this 25 years ago They'd be like oh no, the state doesn't have a spending problem, the state's got a revenue problem. It's the real problem. And I'm thinking well, wait, there's. This is a chicken and the egg argument. You have a spending, you've got revenue, you've got revenue coming out. Your, you know, you've got revenue coming out. Your Wahoo here, I mean, you're just spending more than you take in. So you're, you have a spending problem. That's creating the revenue problem, and it's gone on so long that now you have both, in my opinion. But you're saying you said it's a revenue structural problem. Uh, hit me with this here on the way in all right.
Speaker 1:So this is a. This is a takeoff on a op-ed that bruce tangeman has, a former department of revenuevenue Commissioner Bruce Tangeman has written. It's now showing up in several publications. The title of it is Does Alaska have a Revenue Problem or a Spending Problem? And basically Tangeman says a little bit of both and, in the process of explaining why, he says that he blows through the PFD and just treats that as part of spending and saying, well, we just need to keep reducing the PFD and that's how we'll solve this, and then we need to do something like zero-based budgeting to address the spending problem. In all honesty, not a very helpful article, but it does set up this issue Does Alaska have a revenue problem or a spending problem? Here's why I say it's a revenue structure problem.
Speaker 1:Sb 109 is the perfect setup for this conversation. What we have is a legislature who is probing for the weakest link in terms of where they can find additional revenue. Pfd cuts are additional revenue. They aren't cuts in spending. Every economist that has looked at this issue in the 2016 studies, the 2017 studies, the 2021 study that ITEP did they've all treated PFD cuts as revenue, because that's what it is. It's a diversion of revenue, of additional revenue into the UGF by diverting a portion of the revenue that's supposed to be going to individual Alaska families. And so what the legislature has done all the way along is look for the weakest link, the revenue source that has the least support, and then they just gone in and they probed that. Now, to date it's been the PFD, because PFD cuts really only affect middle and lower income Alaska families. They take some money, yes, they take some money. Yes, they take some money from the top 20%, but as a share of income it's a trivial amount and the top 20% are more than happy to give up that portion of their PFD in order to avoid taxes. But the legislatures look for the weakest link. If, instead of giving them the PFD, which really hits only middle and lower income Alaska families, if we had had a revenue structure that said everybody's going to pay the same proportionate share or oil companies, you're going to pay a proportionate share, or non-resident industries like tourism and fishing, you're going to pay a proportionate share of the cost If we had had a broad-based tax that hit everybody equally, didn't focus the entire burden on middle and lower-income Alaska families, but had hit everybody equally, we would have had a broad-based pushback on additional spending, the top 20% would have said wait, you're going to raise my taxes to do what?
Speaker 1:No thanks, we're not going to have additional spending, you're not going to raise my taxes to do that. The old companies would have said, wait, you're going to increase our taxes to do that? No thanks, because they were going to pay a share of it. They would have pushed back on spending and held spending down. They would have I mean, that's the donor class. They would have pushed back on their legislators and say don't do that, because you're going to increase the taxes on me. If we had been paying for this through a broad-based tax.
Speaker 1:But we haven't done that. Instead we've done it through PFD cuts a very narrow, economically narrow tax that hones in just on middle and lower income. Alaska families the weakest in terms of being able to push back, don't have lobbyists down there, don't have the time, mom and pop don't have the time to follow all this stuff in detail, the weakest link in the chain. And so they continue doing it. And that's what SB 109 proves that I mean they're just continuing to go suck the revenue out of the PFD through PFD cuts, suck the revenue out of middle and lower income Alaska families and the rest of the population, the rest of the stakeholders in the state, the old companies, the industries that are dependent on non-residents, and the top 20 spending more. But they're not using their resources, their abilities, their ties to legislators to push back because it doesn't affect them.
Speaker 1:And as long as they can keep sucking the PFD dry, as long as they can keep building additional spending by sucking down the PFD, focusing it on middle and lower income Alaska families, the top 20% oil companies, non-residents aren't going to push back, because if they do, somebody is going to say, well, let's just tax them.
Speaker 1:Then, if they're going to start into this conversation, let's tax them, let's tax them also. So they're just, they're acquiescing to the increase in spending. So to me, the problem this isn't a revenue problem, it isn't a spending problem, it's a revenue structure problem, because we've allowed the legislature to find a weak link in the chain and just blow through that in terms of additional spending. And you're right, it's a push-pull, michael. I mean, you're right. Once you have that much spending, then you start having a revenue problem behind it. But the reason we have a spending problem in the first place, the reason we go down this road in the first place is because we have a revenue structure problem that has not captured all of Alaskans in pushing back and being affected by and thus in pushing back on spending.
Speaker 2:I mean this is a big deal here. Tangeman actually again says some of the quiet parts out loud. I had to laugh, he said. Because exactly what did we say for years? That boy, it's been a nice, you know, it's been a free ride. The free rides die hard, you know. Buckle up sugar lips. Here it comes. And he even says that on the expenditure side, alaska's been fortunate that for much of the past 50 years our expenses have basically been 100% covered by taxes and royalties paid for the industry. But but free rides die hard. Essentially, he's already saying it there's going to have to be a tax and he flat out says it there's going to have to be a tax some way down the road. And that's what we've been talking about. There is, and in tangiment, to his credit, says the same thing it's, you know, the spending is largely unaffected.
Speaker 1:There is nothing has stopped them from continuing to spend Because there hasn't been pushback because they found a way to target the weakest link, to target middle and lower income Alaska families, the ones without lobbyists, the ones without trade associations, the ones without the ability to go down to Juneau, the ones without the information flow that all the other segments of the population get. They've been able to target that segment. And so the rest of the segments, the top 20%, the old companies, the non-resident industries, just sat around going, oh lucky us, we continue to get free government. I mean, think about the childcare right. Childcare affects a lot of upper middle income Alaska families that have dual incomes, have the wife working and the husband working, have children at home and, oh my gosh, childcare is expensive. We want somebody to help cover the cost of child care. We don't want to pay for it. So let's just go to PFD cuts. Let's take money out of the hands of middle and lower income Alaska families and use it to pay for our child care, which is essentially what that bill is, either whether it's through a tax credit that Julie Colon's done, or whether it's direct subsidies that Zach Fields wants to do.
Speaker 1:It is taking money out of middle and lower income Alaska families to pay for the child care of the top 20%. It has been revenue structure all along. It has been the failure to broad base the hit, to broad base the hit, the cost, the discomfort from the increased spending, to broad base that and make everybody pay a share. It's been that failure that's resulted in additional spending, out of control spending and sucking up the need for additional revenue to follow along up the need for additional revenue to follow along. I swear to God, I swear, if we had paid I know this to a certainty if we had paid, if we had required the oil companies to pay for the increased spending through adjustments to oil taxes, those spending increases never, ever, ever would have happened, right? No, the oil companies would have happened, right. No, the whole companies would have come down like a ton of bricks.
Speaker 2:Yeah, they got the big lobbying stick, they would have been beating them down on that. And I want to clear something up here, because there's been some comments here in the chat room that I think encapsulate probably what some of the listeners think out there. Randy says I think people should push back against Brad's tax increase proposals. We need to stop the gestation of an income tax. Fat Ray over on YouTube says yeah, let's do that revenue structure thing so I can add taxes to the list of reasons why I'm leaving. Willing to bet I wouldn't be alone. You don't understand. Taxes are coming. Taxes are here, Michael. Well, I mean even set. Okay, let's just set aside the argument about the PFD being a tax. Okay, Just for a second. I agree with you. It is a tax. Matt Berman, the ICER professor, says it has the, it is the effective attacks, it's. The ICER said it would be the largest tax. I mean let, but let's set that aside.
Speaker 2:Everybody is saying now, every legislature, when you look at it and they start talking about revenue, they all talk about taxes. They are coming and this is what you and I have been saying for 10 years. We're not saying we are fans of taxes. We're not saying that we love taxes, we're saying we better start talking about the type of tax we want because it is coming, and if we don't start talking about it and we keep ignoring it, they're going to shove the worst form of tax down our throat that could possibly happen. This is. I'm getting pissed now because this is what I'm trying to explain for 10 years. I don't want a tax, but this is where we're going, and if we just ignore it and go la, la, la, la, la la I'm not talking about taxes they are going to stuff one right down our throats. That will be the worst tax that we could possibly imagine, because it's easiest for them and worse for us. That's just what's going to happen. Taxes are coming, people. It's inevitable.
Speaker 1:And that's Michael. If we would have done that in 2014, we would have done that in 2015 and said look, if we're going to increase spending, if we're going to increase spending, if we're going to continue to grow these deficits, we're going to pay for it with a broad-based tax. We never would have had those deficits If we would have said oil companies you're going to have to pay more if we continue this spending. Top 20% Natasha, you're going to have to pay more if we continue this spending. Non-resident industries, fish tourism you're going to have to pay more if we continue this spending. It never would have happened.
Speaker 1:We're not talking about creating taxes for more revenues. We're talking about creating taxes, a broad-based act to act as a disincentive, as an incentive to push back on spending Act as a disincentive act as an incentive to push back on spending. We're talking about motivating people who have power, political power, to push back on spending. You don't want taxes and that's the advantage of taxes you don't want them. So people push back on additional spending that create them.
Speaker 1:We haven't done that. They found the weak link in the fence. They found the way to direct the cost to middle and lower income Alaska families and then, once they found that weak link in the fence, they just kept going. If we would have said in the early 20 teens, if we would have said in the middle 20 teens, if we would have said in the late 20 teens, if we would have said in the early 2020s, we're going to pay for this on a broad-based basis, with top 20% non-resident industries and the old companies paying a proportionate share, spending would have stopped. But we didn't. We kept letting them take the PFD. So the problem isn't not enough revenue or two. The problem isn't we didn't structure the revenue right and, as a result of that, spending has continued to grow because they found a way to get the revenue to fund that spending in a way that they didn't get hard pushback.
Speaker 2:Well and I will say this before we go, because this is the, this is it right? Here we're coming up on it Republican. They have. They have leveraged the Republicans risk, adversity to the to even discussing taxes. That's how they've done it. They've leveraged that, that, that that the aversion to taxes, to where they just basically say, well, you don't want to tax, do you? And that's what they do. They drop that bomb and then they walk out of the room. The Republicans spin and go well, no, of course we don't want to tax.
Speaker 2:Nobody even wants to talk about a tax. I mean again, brian says it here in the chat room. It's not that Brad who's advocating for taxes. He is and has been the guy who's been warning that taxes are coming, that we've been talking about this on this program for years, that taxes are coming and that we should have a discussion, that if they are coming and if they are inevitable which has been both of our positions for the last 10 years then we should at least have a say in making sure that the tax that we have is the most equitable and has the biggest potential for holding back the size and scope of growth in government. This is where we've been, but they've used that. Oh, you don't want taxes, do you? Okay, that shuts up the conversation. You don't want taxes, do you?
Speaker 1:That's what it's about. And then they keep growing government by taking additional PFD cuts. They hone in on the weakest link. They don't stop growing government, they just continue growing government by honing in on the weakest link. I mean, in all fairness, randy Griffin is the biggest ally that Andy Josephson has, because Andy Josephson wants you to keep focused on PFDs, because he knows there isn't enough political support to push back on spending If he can keep using PFDs. And when Randy says, oh, take PFDs, pfds, yeah, don't do that, go ahead and do that, don't have taxes. He's playing right into Andy Josephson's hands.
Speaker 2:This. This whole thing is so frustrating because now we're seeing it, and that's the thing Every time we talk to. This is the dichotomy where they would say do you want taxes or a PFD? Well, that's a false choice. I mean, that's a fault, but that's how they've been doing it. Do you want taxes or do you want that? Oh, well, you want taxes? Well, then let us do this. And people go okay, yeah, yeah, take the PFD, I don't need the PFD. Meanwhile, people in the lower income brackets are going wait, that's like kind of you know, propping us up and but everybody's else like just don't tax us, whatever you do. It's like we've been avoiding it for so long.
Speaker 1:When it finally does come here, it's going to be a shock to the system and that has facilitated, enabled what's coming, michael, because they've used the don't taxes, use the PFD to build spending to a level now that almost to a level that the PFD can't support cutting the PFD can't support anymore. But they've got spending up at that level, they've got everybody invested in spending at that level. They've got constituencies built around that level and so they're going to say, oh well, now we need taxes to support that level of spending late 20 teens, early 2020s. If we'd stopped it by saying, look, everybody's going to have to pay a proportionate share of whatever additional spending there is, that would have stopped it. But we allowed them by saying, by all this crud about no taxes, no taxes, use the pft, no taxes.
Speaker 1:We allowed it by all, by by all this crud of allowing them to use the pfd to build up spending to a level that we're now going to get stuck with taxes paying for. Right, it is revenue structure. We have done it to ourselves through revenue structure. It's not spending, it's not revenue, it's revenue structure. We allowed them to target the weakest link in the fence and to build spending all around that, and now it's going to spread. Now it's going to spread.
Speaker 2:Well, and then, as I've said it for years, if we don't take a stand as people were going, oh, take the PFD, just don't tax us I kept saying you don't understand, If you don't take a stand now, they're going to take the PFD and then they're going to tax you, so you'll be double losers. That's where we're. I mean, that's what? Right now? We're all double losers because they're going to take the whole PFD and then there's going to be a tax structure on top of it. You've done nothing.
Speaker 2:Brandy said something about well, we want to avoid the, we want to avoid the pain. We want it to be as far down the road as possible. You know, we don't want it. That's not the way to go about it. You can't be like oh, we just want to put it off as long as possible, because that will make it worse if we don't. You know, just because Kathy Giesel says an income tax is coming does not mean we have to rush it. It's coming and we should not want to rush it. You're right, we don't want it. But if we don't deal with it, it's going to be worse than ever. It's the double indemnity.
Speaker 1:That's the very reason that we're going to have taxes. It's the very reason that we're going to have taxes because we enable them to build up spending through using PFD cuts. If, in the early 20-teens, the mid-20-teens, the late 20 teens, the late 20 teens, we would have said nope, no more spending without broad-based taxes Would have stopped it, we never would have gotten to this point where we're going to lose the PFD and have taxes on top of it. We never would have gotten there had we said broad-based taxes, because it would have stopped it. At that point, the oil companies would have said, nope, we're not paying for anymore. About 20% would have said nope, we're not paying for anymore. Non-resident industries would have said, nope, we're not paying anymore.
Speaker 2:Anthony said. I don't disagree that taxes are coming and or necessary. What I'm saying is that those net increases, absent of an overall reduction of cost of living and resources, is going to accelerate, not decelerate, the conditions required to collapse our economy and drive our population out. Drive out the population that can leave and force the ones who can't to be tethered to more and more government assistance and create even more drain on the hemorrhage economy, the doom loop we talked about that. He's not wrong.
Speaker 1:No, no. And the way to stop it was to have had broad-based taxes. So everybody pushed back. I'm saying this not as a historical matter, but we're at it again. We're going to cross 75-25. Let's say 75-25. Let's say that is the line. Now we're just going to stand on that line, forget about 50-50. Forget about the statute. We're going to stand on 20, 75, 25. Well, we're about to cross that and the question is are we going to let them cross that and use it out of PFD cuts and build additional spending? Because they, because they can build it on the weakest link revenue source, we're going to let them do that. Are we going to stand and say, no, you want any further increase beyond 75, 25, you got to do it through broad-based taxes. And I swear to you to a certainty that if the oil companies think they're going to get stuck with paying for part of this, there will be no increased spending.
Speaker 2:Right, no, and yeah, the doom loop thing that we've talked about in the past is there's a finite pool to be able to tax from and if you tax them, some of them will leave, which will force that same amount of tax to be on a smaller pool, which in turn will force another cadre to leave, which will shrink it even more. That is the doom loop and that's what we're approaching right now, and it's a self-reinforcing negative spiral. Is what it is. All right, brad Keithley, alaska's for sustainable budgets. Boy, I was all kind of just sanguine and stuff at the beginning too, and now Brad's got me all spun up. Let's get to number three.
Speaker 1:I forgot what number three?
Speaker 2:was yeah, oh, look, the next state cost wave is building. What is the next state cost wave? I mean, I don't even know if you want to go into this one, brad, because I mean, this is such a you know. Look, you and I, I just feel like it's Groundhog Day, right, every Tuesday for 10 years it's Groundhog Day. We talk about the same things, we point out the same things in different ways, with different examples and different things, but you and I have been crying the same song and trumpeting the same problems for 10 years and yet people still they get hung up. Oh well, you guys want taxes. That's not what we said. Oh, you guys want that's again, it's not.
Speaker 2:What we've been doing is we're trying to tell you that this is what's coming, and the last two years they've all been saying the quiet part out loud that this is now they're admitting this is what's they're saying. They're telegraphing that it's coming and people are like oh, no, well, no, no, we're just no, no. And you know, at some point, brad and I will be like we told you so, not that that will feel great, because we will still be, uh, uh, will be subject to the consequences as well as everybody else it's best to be able to tell you. I told you so when you're standing outside of the consequences. But here we are. All right, brad, I'm sorry, I'll let you go and get into it whenever you want.
Speaker 1:Well, it's relevant. I mean that discussion, the first discussion, the first two segments is relevant to the third segment. Third segment is you can see the next cost wave, the next spending wave coming. There's just all sorts of headlines about it. In the Juneau empire there's about 100,000 Alaskans could lose health insurance under GOP plan backed by Trump. Hospital officials say it's probably not inaccurate in terms of its impact. Union expects at least 1,378 Alaska federal employees in probationary status to be fired. And you see headline after headline about what the receding federal presence in Alaska is going to do to the Alaska economy. And so you sit there and go well, are these people going to take it? Are these people just going to say, okay, well, I guess the federal government isn't going to do it anymore, so we got to go find other jobs? Hell, no, they're going to start coming to the state. I mean part of the impact, part of the reason or part of the impact of the 100,000 Alaskans could lose health insurance, will go right back into the loop we had when Walker was thinking about Medicaid expansion, which was the hospitals are losing money because they're not being reimbursed by the federal government for the poor patients who come into the hospitals that they cannot refuse to see, who come into the hospitals that they cannot refuse to see. The hospitals will be losing money, and so they'll say, oh, we need more money. Well, in the case of Medicaid expansion, what Walker did was say, okay, we'll do Medicaid expansion, that'll get us more federal money, and so we'll solve your problem that way. Well, if we've got reductions in Medicaid as a result of federal recession, as a result of the federal government leaving the field, so to speak, and uncovering this problem again, hospitals aren't going to say, okay, well, I guess we're just going to make less money. Hospitals are going to say we're going to go to the state and ask the state to step up. Part of what the Medicaid reductions are going to be. Part of it is going to be taking people off the rolls of Medicaid, but part of it the federal government can easily say we're going to fund less. We're going to reduce the percent of Medicaid that we pay. We're going to leave Medicaid in place. We're going to leave it as a shell in place. People will be able to claim Medicaid, but we're going to reduce the federal contribution to covering the cost, which leaves the state on the hook. Right, guess who picks up the bill for that? You can see the next wave of costs coming. And if we say, I will fund it through additional PFD cuts or we'll fund it through hugely regressive sales taxes that focus in on middle and lower income Alaska families, if we do it that way, we're going to be in the same shape five years from now that we are already. I mean, which is we're.
Speaker 1:You know spending is increasing. We're not able to stop it. It has not worked. Folks focus on this.
Speaker 1:Since we started talking about in the early 20-teens, it has not worked to say no, just say no to spending. We've said that. We've said that over and over and over. Don't increase spending. It has not worked. And if you think it's going to start working magically now by us just saying no middle and lower income Alaska families saying no then you're just ignoring the last 10 years of history.
Speaker 1:We've got to address it. We've got to address it through changing the incentives. We've got to change it by broadening the base of people saying no. The top 20% haven't said no. The oil companies haven't said no to increased spending. In fact, they've been some of the advocates of increased spending. Ooh, more childcare for our employees, goodie, yeah, we can do that.
Speaker 1:The oil companies haven't said no to increased spending. The non-resident industries haven't said no to increased spending. They've all been in favor of increased spending because they didn't have to pay for it. If we change the incentives so that they get stuck with part of the bill, they will start saying no also. It hasn't worked for us just to say no. Anyway, the next cost wave is coming. It's coming in terms of as the federal government recedes. It's coming in terms of, as the federal government recedes, we think, oh good, we'll get the federal government to reduce spending and so we'll solve the federal problem. It's going to be at the expense of increased pressure on the state legislature to increase state spending to offset that. Medicaid's the best example of that, but it's going to show up in a bunch of other places as well, and you can see it coming with these headlines.
Speaker 2:Well, the good news is the federal government is cutting back because they're in the same boat that the state is. They don't have the money anymore. They're going to be cutting back. But the bad news is that you have constituencies for those programs, whatever they are, whether they're medical or something else, and they're going to look to the state immediately to fill that gap, and so there's going to be more pressure on the state to spend more, even though they have less money than the federal government in the long run.
Speaker 2:That's the bottom line. Is it too little, too late, brad? I mean, if we decided, let's just say that we took over the, we pod peopled all the folks in the legislature and they were like we'll do what you say, master, whatever you say. And we said, okay, it's got to be something broad-based, it's got to be the revenue's got to change. We've got to structurally change it. Everybody's got a piece of the pie, everybody's got to share, throw something in the pot. Do you think that we're? Do we have enough time? I mean, is it even feasible at this point?
Speaker 1:Well, that's two questions. One is it feasible to get that passed? Not, you know, not with with Randy and others saying. Oh we don't want that Right.
Speaker 1:It's not, it's not feasible to get it passed. If they, if they still get sucked in by the Andy, by the Andy Josephson's of the world to support, to support their, their focus on, on the single source, the weakest link in the in the chain it's, it, chain, it's can we get it passed? I think you know we keep talking about it. I have to hope that we can get a broad-based protection passed. If we got it passed, would it work?
Speaker 1:Yes, if you've got the oil companies engaged, if you've got Ralph Samuels and the non-resident industries engaged, if you've got Natasha von Himhoff and the others in the top 20% engaged in pushing back on spending, yes, we will stop spending. So it's not a question of is it too late to stop spending? No, you can stop spending. But but to do it you have to. You have to, you have to broaden up the hit so that there's an incentive for people, for others, to push back. You and I saying, as we've demonstrated over the last 10 years, you and I and Randy saying no, don't increase spending, hasn't worked. There's just too many people out there, and as long as they, you know, wanting to, wanting funding from government.
Speaker 2:Oh there's the whole election cycle was an example of that. It was nothing but more spending the whole election cycle.
Speaker 1:And as long as they can get it from the weakest link in the chain, they'll continue to do it. So so we won't stop spending. If we don't, if we don't create incentives for everybody to push back, if we continue to go down this road of it's only middle and lower income Alaska families that get hit. So everybody else doesn't care, or in fact they favor it, because you know, yeah, he doesn't like child care, he doesn't like free child care, employers, corporations. If we don't do that, if we don't broaden it out, spending will continue. We'll lose. We'll just keep going down this road. If we're able to broaden it back, broaden it out, so the coalition pushing back is broad-based, then yeah, we'll stop spending. It's that simple.
Speaker 2:It's that simple. It's really. Brad just laid it out. It's that simple. But again, there is no political will to cut folks, even those people in the legislature that want to cut, they are a minority of the minority. That's what's really coming out here. I mean, we saw that in 2018, 2019, right, even when the governor had the ability, when he could have you know, he may not have been overridden in his vetoes. We had, even when the governor had the ability, when he could have, you know he may not have been overridden in his vetoes. We had members of the minority that crossed the aisle and went ahead and would, but because they didn't want their piece of the pie cut, everybody's got to feel the pain, everybody's got to do it and nobody is willing to do it. There is no political will to cut there there is.
Speaker 1:There will be political will to cut. There will be political will to cut if the donor class, the oil companies and the non-resident industries push back. There will be the political will to cut because they will pressure their representatives, the ones they helped put in office to cut, to stop it if they're going to have to pay for it.
Speaker 2:But they have no skin in the game right now.
Speaker 1:Right. There won't be the political will. The only ones raising the issue are the ones being affected middle and lower income Alaska families, the ones being affected, yeah, so it's changing. Maybe another way to think about it is changing the political will, changing the scope of people pushing back, changing the people pushing back on the legislators, creating the incentive so that we have a broad base pushing back, as opposed to just this narrow, weak link in the things.
Speaker 2:And Willie nails it. Willie nails it when we were talking about if we don't start talking about this, they're going to give us the worst form of tax ever, he said. You could bet your ass that the income tax bill will have a cap for taxes at $200,000. The top 20% aren't going to pay an equal proportional share for their spending. That's what we've been talking about, that if you wait around and keep ignoring it and la la, la, la la we can't have the la la, la la then they'll put something in like this that has a cap on the top 20% and the rest of the state will still pay the bill and they'll still want spending because their constituencies and their contractors and their you know they'll. Hey, it's fine with me.
Speaker 1:We've already seen that. We've already seen that with the, with the so-called income tax bills that Zach Fields and Elyse Galvin put in. They were very narrow, narrowly drawn bills that generated a very little bit of revenue. They could say that they had an income tax and they could say that they were trying to get a contribution in the top 20%, but they were very narrowly drawn. The bulk of it still came from PFD cuts and you're exactly right, willie's exactly right. It'll be drawn in a way to protect those interests. If we don't insist, if Randy doesn't insist on everybody having skin in the game, then Randy's going to be the one that gets hit the hardest out of this.
Speaker 2:Yeah, I love it. Randy said early on agree, michael dukes is right, there is an excessive spending problem. And yet right now he comes back and says please don't tax us workers so you can give out more free money on the pfd.
Speaker 1:You're missing the point, you, you're missing as I tell you, randy is andy josephson's biggest ally. Yeah, randy, and randy and and Andy are right there together.
Speaker 2:And there's a whole bunch of people out there who are like that on the right. Oh well, I don't care about the PFD, just take it Again. Yes, they're going to take it, and then they're going to tax you on top of it Because you were avoiding talking about taxes. They'll hit you with the hardest one that they can find. Brad, 60 seconds Summate today's wonderful program for us all the way through here.
Speaker 1:People are giving up. I mean, sb 109 is the co-sponsors on. Sb 109 is the single most disappointing thing I've seen in the last 10 years. The minority members, the Senate minority members the very ones that we're counting on to say no have given up and they listed themselves as co-sponsors on the single largest permanent individual tax crease in Alaska's history. Sad day.
Speaker 2:Maybe we should vote harder, brad. Maybe that's what we should do we should vote harder and make it work. It's just I don't know how to fix this. I really don't. I know that it's coming and if we don't have a voice in how this is working, if we don't have a voice in how we are taxed, then we're going to get the worst possible outcome and it will affect us and not the people who are benefiting from it in many ways. All right, brad, thank you so much for coming on board and joining us. We appreciate it.
Speaker 1:Michael, as always, thanks for having me. Well, that's a wrap for another week's edition of the weekly top three from Alaskans for Sustainable Budgets. Thank you again for joining us. Remember that you can find past episodes on our YouTube, soundcloud, spotify and Substack pages, and keep track of us during the week on Facebook and Twitter. This has been Brad Keithley, managing Director of Alaskans for Sustainable Budgets. No-transcript.
