The Weekly Top 3 (2.23.2026)

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 23, 2026.

This week, our top 3 issues are these: 1) we discuss the action taken by Senate Resources this past week on oil taxes and why we think its performative and unserious (2:17), 2) we explain how Rep. Galvin’s proposed income tax becomes very regressive — indeed, much more than the Governor’s proposed sales tax — when coupled with the additional steps required to close the full deficit (17:54), and 3) we explore why some seem to discard alternatives to PFD cuts even when, by raising susbstantial amounts from non-Alaskans, using the alternatives would leave much more money in the pockets of Alaska families and the Alaska economy (34:54).

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.

Transcript

This Week’s Three Big Issues

SPEAKER_00 0:10

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 23rd, 2026. 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 a.m. I join Michael weekly in the first hour of Tuesday's show from 6.10 to 7 a.m. 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, medium.com. 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, our top three issues are these. First, we discussed the action taken by Senate resources this past week on oil taxes and why we think it's unserious. Second, we explain how Representative Galvin's proposed income tax becomes very regressive, indeed, much more than the governor's proposed sales tax when coupled with the additional steps required to close the full deficit. And third, we explore why some seem to discard alternatives to PFD cuts, even though by raising substantial amounts from non-Alaskans, using the alternatives would leave much more money in the pockets of Alaska's families and the Alaska economy. And now, let's join Michael.

Setting The Stage: Platforms And Schedule

SPEAKER_01 2:17

Brad, let's get down to it because, boy, I'll tell you what, the stuff that's going on down in Juneau is just man, it's making my head spin. All the the the mental gymnastics that are required for some of the uh some of the behavior down in Juneau right now is pretty crazy. Let's start off with the Senate Resources Committee, uh, and uh this uh this massive overreach where and on the one hand, they they saw the governor's revenue bill and they were like dead on arrival. Uh but let's take this part of it and let's uh let's stretch this out into infinity. Give give me the give me the deeds here.

Oil Taxes Under SB21 Are Plunging

SPEAKER_00 2:54

Yeah, so so there's no question that oil taxes need to be adjusted, need to be changed, need to be reformed. Absolutely no question about that. When you look forward for the next 10 years, uh the production tax, which traditionally, at least over the first decade of decade, uh first decade of SB21, produced about 7% of gross re gross oil revenues, gross well head oil revenues, produced about 7% uh take for the state. When you look over, when you when you compare that to the upcoming decade and look at the projection that Department of Revenue has made, that's down to less than 2% uh by the by the end of the 10-year period. And that's just that's that's horribly deficient against any standard, judging it against other states, judging it against what oil companies can stand, judging it against where Alaska was during the first decade of ACEs or first decade of SB 21, judging it against where Alaska was before uh ACEs, before the overreach of ACEs. No question that oil taxes need to be reformed. Um, and and the legislature needs to dig in and do the hard work to do that. What Senate resources did instead by substituting in a 17% gross production tax uh in place of the governor's proposed uh uh fairly carefully thought out uh revenue plan by substituting in 17% is a horrible overreach. I mean, it would, it would, that at that level, gross production taxes would exceed uh uh gross production taxes in any other state in the U.S. And added to royalty and added to the other taxes that we have property taxes, corporate income tax, um, and um and and royalties, it would produce a level of take uh that's substantially higher than what you find in in most other countries. So 17% is as much a foolish uh proposal as the current uh SB21 regime that's producing less than 2% by the end of the 10-year period, is as much an overreach as the current oil tax regime is an underreach. I don't know what Senate Resources was trying to do. I don't know what Giesel and Willikowski were trying to do. In some sense, it's it's counterproductive. If they were truly trying to reform oil taxes, it was counterproductive in the sense that it's like a poison pill. I mean, it's nobody will adopt, nobody should adopt, and hopefully nobody will adopt a 17% gross production tax. And so by putting that out there as their proposed solution, they essentially put out something that that wouldn't be that wouldn't and shouldn't be adopted, and essentially made it into a poison pill that that nobody nobody will touch. They could have done the hard work. I mean, modeling modeling this stuff is not all that difficult. I'd done it in some of the columns. I've started, I've done most of it in some of the columns I've written in the in the Alaska Landmine. You can look at uh levels of take in in you know the last decade of SB21, which is a good standard to start with. You can look at the level of take in the last uh uh uh decade of or the first decade of SB21 and and and see what you have to do, see what adjustments you have to make in the oil tax code going forward to to match that level of take that you had in the first level. If you want to go back to what we had before ACEs, uh in the in the old system, the old grass product production tax system we had before ACES, you can you can model that. You can see what you need to how you need to adjust production taxes to uh to go back to that level. So it's not all that hard to do. And and the fact that they didn't do it and the fact that they overreached by going to 17% is a real disappointment. And frankly, some indication that I don't think they're serious uh about looking at uh at the changes necessary to gross production taxes.

Senate Resources’ 17% Gross Proposal

SPEAKER_01 7:04

How much of this do you think is how much of this do you think is just the grinding axe that Willakowski has? I mean, he's been very much so. I mean, he's the guy that's been quoted as saying we're we're we're under we're underselling our own take by a billion dollars. We're you know, he's constantly been hammering on this for years. And while you and I both agree that there is money on the table, uh there's got to be a balance there, right? To to manage investment and everything else.

Why 17% Is A Poison Pill

SPEAKER_00 7:31

Yeah, exactly, exactly right, Michael. I mean, what we had under ACEs, you can you can look at what we had under ACEs by looking at the tax levels and looking at the resulting impact on on producer economics and then looking at the investment levels. We had while the world from roughly 2010, 2010 up to 2014, while the world was having a huge jump in investment in oil projects worldwide, Alaska was going down in terms of investment. And you can tie that directly to the economics that that ACE has created. So we needed an adjustment uh in 2014. Now, that adjustment, I think, was was good and was solid for the first decade uh of uh of SB21. It resulted in a take of about 7% of gross production and gross production, gross revenues. And that's a that's a fairly standard level. If you look at the severance tax levels uh that are on uh royal that are on uh the gross uh uh throughout the US and throughout the world, 7% is a pretty standard number. And so we were we were roughly following along with that number in the first decade. But in the second decade of SB21, because of the way all of the credits and all of the deductions start piling on top of each other uh in the environment as we as we've gone into the second decade, we're plunging. Oil production taxes are plunging. And and Willikowski's right to raise that issue and he's right to focus on that issue. But he's just gone he's gone way too far. It's like he's not serious about it. It's like he wants to do messaging about, oh, we need to, we need to change it and we need to change it in a dramatic way without being serious in trying to change it in a in a way that's productive. I mean, he talks about Hammond. He talked about you know getting back to the Hammond Hammond standard. Well, there's a couple of things that's wrong with with his view of adding 17.5 to 12 and a half to get 12 and a half royalty to get to 30 percent. One, Hammond's third a third of third was on the net. It wasn't on the gross. And so when you're trying to, when you try to get to a third on the gross, you're way overreaching uh on the on the net. Net is after net is after costs. Um, and the other thing is he ignores the impact. Alaska collects revenues from producers in four different ways. We do it through royalties, through the production tax, through the corporate income tax, which has its own problems that need to be dealt with, uh, but we still collect some revenues through corporate income tax and through statewide property tax and oil property tax. And those four add up to a certain level of revenue. When you try to get to the Hammond's third, misstating the third as being on the gross, when you try to get to the Hammond, Hammond's third by just using two of those and ignore the other two, you again, you're way overreaching. So I bill just comes across as as unserious at a time when we need serious tax reform, at a time when we do need tax reform. And it and and and there are ways to do that tax reform in a way that would produce good numbers, solid numbers, both for the state and for the producer, uh producers. And and and there's ways to go about it. And you know, there's a fairly clear path to how you get there, to the reforms you need to make. Uh, at a time when we when we need that serious tax reform, Bill's being unserious about it. And Giesel joined in uh and Clayman and others that voted for that bill out of Senate resources. Shoving it off on Senate finance in a time when Senate finance has a whole lot of other things to do is is also unserious. I mean, Senate resources is the place where where oil taxes, oil tax reform has always started. Um it started either in resources on the House side or resources on the Senate side. And they've done the hard work of going in, getting the testimony, developing the numbers, looking at the looking at the projections, and putting together a fairly solid case of how you do oil tax reform. For them to just, you know, to to to go to that number and then just throw it off to Senate finance is uh is unserious, it is an unserious way of legislating at a time that we need serious legislating.

SPEAKER_01 11:50

So what's your speculation here as to why it's uh it's gone down like this? Because again, this was this was very rushed. I mean, usually these things take a long time to pencil out because the the tax structures are pretty complex and everything else. And I mean, they bang this thing out in an afternoon kind of thing. You know what I mean? It was like pretty quick. So is this all is this all political theater? Is this performative to just for him to be able to beat his chest on election season and say, look, I tried to tax the oil companies? Or is he, I mean, what do you think? Are they trying to just start the conversation? Because I would have thought that if they were going to start the conversation, they would have done it in the committee and held it in the committee and made a lot more hay about it.

Investment History: ACES vs SB21

SPEAKER_00 12:31

The takeaway I have from it is that is that Wilkowski's counted the votes, and that, and this could be wrong, but the takeaway I have is that is that Wilkowski's counted the votes, the votes aren't there for reform. And so, and so what he's done instead was decide to go for headlines, decide to, you know, coat go for this exaggerated number, um, you know, try to tie himself to Hammond in the wrong way, uh, and and try to, you know, grab headlines about he's a crusader, um, and and you know, use the situation to his own personal political advantage instead of trying to be serious about it. And and I and I and that would be consistent with the thought process that I'm not gonna get the votes anyway, I'm not gonna get reform anyway. Um, and so what I'm gonna do is I'm just gonna grab headlines and I'm gonna you know go on the attack and um and try to try to you know make hay out of this because I'm not gonna be able to get reform anyway. I it's it's not it's not good legislating. I mean, even if you didn't think you were gonna get it through this year, right, the this process takes a long, takes a long time to sort of grind through the numbers, grind through the testimony, put together a thoughtful package, and and likely unlikely to pass in the first session where you're doing that, but it lays the groundwork for subsequent sessions that you've sort of come in then with that with all that stuff done, you can really start you know trying to put the votes together. Um and he's and he's foregone the committee has foregone that opportunity uh in this situation, just sort of you know, throwing thrown their hands up the air and said, Yeah, give me some headlines and uh and and move on.

SPEAKER_01 14:13

Political theater at its finest. So uh what what is the solution here, Brad? What I mean, what what should we what should the if the number's not 17 uh or there's other components to it that should be brought into play, uh in a perfect world where Brad Keithley was uh emperor for a day, what would the what would this look like? What would we be talking about?

SPEAKER_00 14:33

They had they had a couple of pieces right in the committee hearing, I think before the one where they came up with 17. One was to harden harden the floor. One of the problems that we've got in the current oil tax structure is we've got a 4%, a so-called 4% minimum, uh 4% of the gross uh minimum on the oil tax. And that's supposed to sort of act as a floor uh on on how far oil production taxes can drop uh due to the other as a result of the other provisions of SB21. The problem with that floor is it doesn't, it it doesn't, it doesn't always apply. And so uh, as we've talked about on previous shows, there is one category of production, uh new production, that qualifies for what's called the gross value reduction, GVR provisions of SB21. Um and that grows, that those volumes grow from 3% to like 50%, over 50% by the end of the 10-year period volumes that qualify for GVR. And GVR has a has a credit provision to it that goes below the floor. It doesn't, it's the the floor doesn't apply to it. And so that's what's driving down the production tax uh levels down to you know less than less than 2% over the over the 10-year period. Right. They talked about hardening the floor and not allowing the G VR credits to go below the floor and also resetting the floor at 6%. Both of those would be would be significant fail-safes uh in SB21. If SB20, if the rest of SB21 is doing weird things, those floors would do a lot to make sure that the state continues to get its fair share of the of the gross wellhead revenue provisions. So they were close when they were talking about those, and then though they just threw those out the window and went to the 17% of gross approach. So they they they had elements. It looked like to me like they were they had elements that they could start piecing together a good reform package, and then they didn't.

SPEAKER_01 16:39

So the GVR and the floor is the problem. That's why we have more production, but less revenue coming in, less taxes coming in, because the G VR and the floor are not working together in the way that they should. Yeah. Where if those were fixed, then we'd have more production, and more production would lead inevitably to more tax revenue.

SPEAKER_00 16:59

Yeah, I did a I did a column a few weeks back that look at what if we had a 6% or a 6.75%, which is what we averaged during the first decade of SB21, 6.75% of growth. What if we had a floor at that level? And and the increase in in production tax revenues would be at about the$400 to$500 to$600 million level that we've always talked about, that we're running deficient right now. So that's about right. That's about the right way to approach it. You know, let SB21 do whatever the heck it's doing with all the other provisions, but harden that floor and set the floor at a rate at a at a level that is reflective of what happens in other states and reflective of what happened during the first decade of SB21. That simple, those simple steps would do a lot to fix the problems we're having with oil production taxes.

Misusing The Hammond “Third” Idea

SPEAKER_01 17:54

Okay, we're continuing now. Brad Keith Lee from Alaskan's four sustainable budgets. Again, aka forsb.com. That's where you find it. Continuing on for the uh weekly top three, we just finished up with number one. Number two, exactly how regressive is the income taxes we've been talking about here, uh, because there's all there's all kinds of different tax revenue measures and everything else, but one of them is the uh the the the the the quote unquote income tax uh that's focused, uh Brad says, on locking in a long-term PFD cut. Brad.

Serious Paths: Harden The Floor, Fix GVR

SPEAKER_00 18:31

Well, this is sort of the continuation of uh we're not having serious legislation this session or we're having performative arts uh this session. At least Galvin has a bill that has stirred up a lot of people. Um it is a it is a proposed education tax, what she calls an education tax. But since you can't dedicate funds, a tax to raise money for education, she says. But since you can't design or dedicate funds, it's not really that. It's it's to raise revenue that might be used for uh for K through 12, but might use be used for other things as well. And it's just stirred up all sorts of all sorts of reactions, both from the conservative side and from the progressive side. The progressives say, yeah, it's about time we had that income tax. Conservatives, you know, claiming it's the end of the world to have a to have a progressive income tax. What's really interesting about it is it's not serious. I mean, so we have about a$1.5 billion deficit uh uh under current law. When you count the PFD at current law, uh we have about a$1.5 billion deficit over the next 10 years. Some weeks it's higher than that, the the projection is higher than that. Some weeks it's lower, depending upon where oil prices are going. But let's just say it's a$1.5 billion deficit. Elise Galvin's bill raises$330 million. About about about 20%, about a fifth of the of the size of the deficit. You know, it's gotten all this reaction that people, you know, that people think, oh, it's gonna raise all of that, all of this money, it's gonna wipe out the deficit, we're gonna, we're gonna, you know, solve it in a way that's that's that progressives like. Doesn't do that, raises about a 20th, about about 20% of the uh of the overall deficit in over the next uh 10 years. So what's what what what does she think is gonna close the rest of the deficit? PFD cuts. So she's raising she's this revenue that she's proposing to raise is 20% coming from this progressive income tax. The other 80% of it is coming from PFD cuts, additional continuing uh PFD cuts. And it really, the bill's designed in a way to lock in those PFD cuts because once you've spent all this energy and you spent all this legislative angst to go through and enact a progressive tax, you're not gonna go in and enact another tax. Everybody's gonna say, top 20% included, everybody's gonna say, we've we've had our tax. Right now we have now the rest of it has to come from someplace else. And the rest of it in in in in the design of what she's talked about, the rest of it comes from PFD cuts. So overall, the so-called progressive income tax is hugely regressive because you've got to combine the effect of the little bit of progressive income tax at the front end with the huge amount of continued PFD cuts, highly regressive PFD cuts at the back end to make the to make the damn thing balance. And the net result is is even more regressive. The net result of those two things is even more regressive than than the so than than the governor's proposed sales tax, which everybody claims is hugely regressive and a and a bad thing. So the net result of this of this progressive income tax that Elise Galvin's talked about and other people have jumped on board with is to produce a total fiscal package, including the back end. PFD cuts that you have to have added to it is to produce a solution that is more regressive than the than the governor's approach. Not quite as regressive as doing it all through PFD cuts. Right. But the 20% coming from the income tax isn't nearly enough to shave down the regressivity in a way that approaches what's going on with sales taxes. So it's it's it's it's performance. It's not an attempt to seriously resolve Alaska's overall budget situation. It's not an attempt to really be fair to middle and lower income Alaska families, although she claims it because the proposed tax doesn't kick in until 150,000 single taxpayer, 300,000 uh uh two taxpayer, uh, doesn't joint filing joint, doesn't kick in until the high levels. She claims she claims it's a burden. She's trying to shift the burden to higher income taxpayers. But when you look at the overall effect of the little that's being raised through the income tax portion and then the remainder that has to be raised through additional PFD cuts, it it is it is shifting the burden, permanently shifting the burden to middle and lower income Alaska families.

SPEAKER_01 23:15

The as you look at this, and again, it seems like what these legislators are favoring more and more are these super convoluted ways of doing things. I mean, we look at Kathy Geisel, the the education bill uh that uh Zach Fields and Elise Galvin and Andrew Gray, you know, the head tax up to a certain amount, underneath a certain amount. Uh if you make over this much money, then you spend, if you make over this much money, then you get it, got to spend another additional$2,000. Now Elise Galvin's got her own progressive income tax. And instead of just a flat sales tax or a flat tax, what are the two? Why do we have to make it so convoluted unless, as you said, it's a backdoor way of kind of semi-codifying these cuts, because once they've done all the pain and got, like you said, they don't want to ink, they won't increase it. There won't be any more talk about taxes because, hey, we just had a tax thing last year. We'll just keep taking the PFD.

SPEAKER_00 24:12

Yeah, it's um it is it's a hide the ball trick. I mean, in a way, it's it's to claim one thing, to claim that you're being progressive, to claim that you're, you know, you're gonna tag high-income Alaska families as bearing the burden of this, when in fact you're you're you're really shifting the burden to middle and lower income Alaska families. It it they're trying to say we're progressive, we're not like that bad governor who wants a sales tax, who wants a regressive sales tax. We're progressives. We want this, we want an income tax that is focused on high-income families, trying to hide the ball of that what they're really doing is by combining that with PFD cuts, which they have to do to close the deficit, uh, by combining it with PFD cuts, they're resulting in a worse overall impact on Alaska families and the Alaska economy than the governor's proposed straightforward uh sales tax. There, there are different ways to do the governor's sales tax that make it a little bit better or a little bit worse. There's different ways to do a flat tax, flat income tax at ICER uh recently analyzed. There's different ways to do that to make it a little bit better or a little bit worse. And and you can and you and you can focus on those to solve the overall problem. But what what a Galvin's doing is trying to, again, like Willikowski, trying to grab headlines by saying, look, I'm a progressive. I'm gonna have this high income, high income, uh, this income tax applicable only to high income Alaska families. I'm a progressive when in fact she's not doing anything. I mean, she's she's hurting middle and lower income Alaska families more than the governor, more than the governor's bad sales tax proposes to do.

SPEAKER_01 25:52

Well, and there's so Brad, there's so much hypocrisy going on in here, even in this article talking about the uh the new revenue that we were just talking about in the last segment. You know, it they that their justification for taking the sales tax from the bill dismissed the idea due to what they said was overwhelming opposition to a revenue measure that would disproportionately affect lower income Alaskans. And again, they just sat through an ICER report that said, what taking the PFD has the largest adverse impact on the Alaska economy and Alaska families, specifically those in the lower income. I mean, there's just so much. Again, I I'm starting to I'm agreeing with you that this is again more about performative, uh, not serious people just looking to grab headlines to get them through the next elections. This is what Rob Myers has been talking about how the stack the structures are in place and the incentives are in place for them to do nothing but just run to the next election cycle. That's what this is about.

Modeling A 6–7% Floor Outcome

SPEAKER_00 26:53

Yeah, and and Galvin, I mean, so the press is falling for it, hook, line, and sinker, too. That that that piece you just read about, oh, the regressivity of the governor's sales tax. Not certainly not as regressive uh as PFD cuts and not as regressive even once you once you put the two pieces together, not as regressive even as Elise Galvin's uh proposed bill because of the back end piece of PFD cuts that you have to you have to use to close the remainder of the deficit. Not as regressive, certainly not as the governor's proposed sales tax is certainly not as regressive as as the combination of the education head tax that got that uh uh Geisel's talked about, uh, and uh and and the back end of having to use PFD cuts to remain the to raise the the remainder of it. People they're getting people to focus on sort of this this this veneer, if I can use that phrase, this veneer of you know progressivity, like Elise Galvin's bill or uh uh Giesel's, you know, less than less regressive than the governor's uh proposed. They're getting people to focus on this veneer without looking beyond the veneer and saying, wait, that only raises$300 million. We've got a one$1.5 million deficit. How the hell is she going to raise the other$1.2? Without asking that question and then and then putting that, applying that remaining$1.2 to the to the to the$300 million and seeing what the regressivity is of that. Brad Keithley, Alaskans for Sustainable Budgets. Final thoughts on number two, Brad. Well, it's it's it's a continuate. This may be the theme today. It's a continuation of performance, performative legislating as opposed to solid, serious legislating. They're they're they're trying to make headlines with these claims. Willkowski in the case of the of the 17% uh uh gross production tax, and Elise Galvin with the claim of I'm only gonna focus on higher income Alaska families. They're trying to, they're they're per they're it's performative in the sense they're trying to grab headlines, but it's not serious in the sense that they're trying to actually solve problems.

SPEAKER_01 29:03

Virtue signaling, kabuki theater, performative, whatever you want to call it, it's to grab headlines and give them something to point back to when the election season kicks off here, right after this session's over. Barbara says, our resident economist, every tax in the end is regressive. The rich can always maneuver their life to escape taxes, the poor can always lobby. The working middle class ultimately bears the burden one way or the other. I actually I had a surprise visit yesterday from Jonathan Christ Tompkins. He showed up here at the studio, and we had a we had a brief discussion. Um and this is one of the things that we talked about was that what's going on in the legislature right now, the behavior, the disconnect from the private economy and everything else, is showing exactly this, right, Brad? On the one side, you've got the poor who are dependent on the social safety net, the welfare net. On the other side, you've got the rich and the crony capitalists who are building their entire business models around government spend. And so they're both sides are demanding, both sides of the of the of this spectrum are demanding and shouting for more spending, no matter what, don't cut my spending. And it's those in the middle that continue to feel the squeeze. And that's why it's uh it's average, middle income, working age families who are leaving because they just can't afford it anymore.

Topic Shift: Galvin’s Income Tax

SPEAKER_00 30:28

Yeah, but it's all relative, Michael. I mean, Barbara may be right, or I'm not sure I agree fully with what she said, but she may be right. But but it's all relative. We got a$1.5 billion deficit. The governor tried to close that. The governor in 2019 tried to close whatever the deficit was at that time through cuts. Didn't happen, not going to happen. He hasn't tried it again. No appetite in the legislature to support those levels of cuts. We got to deal with that$1.5 billion deficit. So the question is, what's the best way? I mean, there's no perfect answer. There's no there's no painless answer, but what's the best way to deal with it? So it's all relative. And and and so you know that PFD cuts are the worst for middle and lower income Alaska families, worst for middle-income Alaska families of all the alternatives. You know that sales taxes aren't perfect, uh, but they're a heck of a lot better than PFD cuts. You know that a progressive income tax of the type proposed by Elise Galvin is just a thin veneer on top of deep PFD cuts. So it's worse for middle income Alaska families. You've got to, you've got to focus on the relativity, the relative impacts of these various bills. None of them are gonna be painless. None of them are gonna be painless because we had a$1.5 billion deficit that there's no appetite to close through cuts, through, through spending cuts. So none of the none of the solutions are gonna be painless. It's it's the relativity of of those solutions. And finding the one that's best for middle income Alaska families is is the best is is the best outcome for the state. I mean, if if it's best for middle income families, it's gonna be best for lower income Alaska families, also. I mean, that's just the way the the the economics of it of it work. So you got to find the one that that takes the least out of the out of out of the middle out of middle income Alaska families. And and it's a relative, a relative uh uh uh uh calculation. What at least try galvin's trying to do is trying to blow smoke at people and saying, oh, I'm only gonna tax the rich. And and so, and so I'm I'm the best, clearly, because I'm the best for middle income families, because I'm only gonna tax the rich. Well, no, you're not. You're only raising 20% of the deficit. You got to close the remainder of the deficit. And what's your way to close the remainder of the deficit? PFD cuts. And when you layer on PFD cuts to this thin veneer you've got of income tax, what's the effect? Worse than, certainly worse than PFD cuts over overall, and worse than a sales tax. I mean, so it's you've got to, you've you've got to do the full economics, you've got to do the full analysis on all this stuff. And then it's all relative. You got to figure out which is the best or which is the worst, depending upon what what what your starting point is among the relative, among the relative options.

The $1.5B Gap And Only $330M Raised

SPEAKER_01 33:18

It's frustrating again to watch all this uh go on, especially when we know that uh this problem doesn't get any better, right, Brad. I mean, we we've seen the we've seen the projections, we know what the 10-year forecasts look like. It just doesn't get any better. And we're about to have an election year, and all of these Yahoos are gonna be running for re-election. And again, a lot of these people were there that helped you create the problem, right? And now they're supposedly gonna solve it and they're gonna tell you in their election campaigns that, oh, I'm the guy to solve all this issue, but they they won't even address it right now when it's time to when when the rubber's gonna meet the road.

SPEAKER_00 33:57

Yeah, they're they're I mean, in in in addition to unserious legislators, we have unserious candidates who are who are talking about you know solutions going back to Governor Dunleavy's uh 2018 pledge of I'm gonna cut our way, cut our way out of this problem. Well, no, you're not. We know you're not. We know the legislature won't go along with that. You may try, but it's not gonna happen. We need to look for serious candidates who are talking about full solutions, not like Elise Galvin with a 30% and only only approaching 20% of the problem. We need to talk, we need to uh look for candidates who are approaching talking about full solutions, and full solutions involve some revenues. And you went and you and they need to be talking about what the least harmful revenue approach is.

SPEAKER_01 34:41

Well, full revenues and oil c oil industry, you know, tax changes, uh, you know, solidifying the PFD, cutting some government. I mean, there's there's the the solution is all-encompassing, just like we've been talking about. Brad Keith Lee, Alaskans for Sustainable Budgets, is our guest. The weekly top three continues on to the final of uh this week's top three, number three. Um, and the question is how much do some of the legislators hate the PFD? Well, I mean, I'll be let me let me premise, you know, me let me uh preface what Brad is about to say with we just watched that that uh Commonwealth North presentation with uh Giesel and former Senator Von Emhoff, and I I would argue that they are basically saying the quiet part out loud that a lot of legislators are saying, which was basically look at all the things we could spend this$685 million on that we wasted on the PFD. Look at all these things that we could spend on the Medicaid, the Medicare, the tourism, the homelessness, the policing, the I mean, just fill in the blank, all the things that they could spend. Boy, they hate there's a lot of them that just hate that money leaving their fingertips, Brad.

How PFD Cuts Make It Regressive

Sales Tax vs Flat Tax Tradeoffs

SPEAKER_00 35:57

One of the things that the most recent ICER analysis does that's different from the 2016 ICER analysis is it looks in detail and with some new tools and using some new approaches, looks at the level of contribution that would come from non-residents um uh under under various under various revenue approaches. The old ICER analysis, the 2016 ICER analysis, sort of looked at that briefly and found that there wasn't much difference, frankly, in the level that Alaskans would pay, the level that the share that Alaskans would pay under any of the various revenue options. They would pay the most under PFD cuts, but only slightly more than they would pay under sales taxes or income taxes or or any of the other approaches. The the burden on Alaskans didn't shift much between the various revenue options. The 2026 study takes a much deeper look at that and a much and comes to much different conclusions and concludes that that there would be a significant difference on Alaskans, on on the share of the overall revenue burden that Alaskans share or bear under various alternatives. So, for example, under PFD cuts, Alaskans bear 86% using PFD cuts, Alaskans bear 86% of the cost of any revenue raised through through PFD cuts. The remainder of it is borne by reduced federal income taxes. But Alaskans would would would bear 86% of the cost of any dollar revenue raised through PFD cuts. But then they go through an array of other options and they get down to two options where Alaskans only bear 68 or in one and 70%, uh significantly less than than the share of the costs that Alaskans are bearing under PFD cuts. One is sale uh seasonal sales tax, which will shift a bunch of the costs to tourists that come in the summer, with more exclusions, that is more uh exclusions for groceries and food and and healthcare and those sorts of things. That would reduce the share of cost that Alaskans bear uh down to 68% compared to the 86% that they bear under PFD cuts. And in an income tax, a flat income tax uh with a PFD credit, that is, you're able to use your PFD as payment toward your toward the flat income tax that would be owed under the state, that reduces the share of the burden that Alaskans would bear of raising a dollar of revenue down to 70% compared to the 83 or the 86% that we're bearing for PFD costs, it would reduce Alaskan's share of the burden down to 70%. Someone else would bear 30% of the uh of the of the burden of raising that that dollar of revenue using that approach. So there are huge differences, significant differences in in the impact on Alaskans uh in terms of the dollars taken from Alaskans' pockets compared to non-Alaskans, and in terms of the impact on the overall economy, in terms of the share that's being taken out of Alaskans' pockets and taken as opposed to being taken out of others' pockets, there's huge differences in the in the various uh alternatives. I wrote a column on that. Uh the my my Friday column last week ended up being on that because I'd gotten a lot of a lot of comments uh about the fact that uh using the old ICER analysis that there wasn't that much difference, I gotten a lot of comments about that. So I wrote last Friday's column on on an analysis of that issue. How much more Alaskans are able, how much, how much Alaskans are able to reduce the impact of that on them of a revenue approach by by these by these various alternatives. I have a couple of trolls that show up regularly, weekly, uh on my column, in the in the comments section on my column complaining about this, that, or the other thing. I'm I'm confident that if I said the sky was blue uh or the sun was yellow, uh, that they would that these trolls would would write negative comments about that. But but what really shocked me was was the comments that that I got on this column that said, oh no, we can't have, we we we've got to use PFD cuts because that's the fairest way, regardless of what the impact is on Alaska families, regardless of what the impact is on the Alaska economy, that PFD cuts is the only fair way to raise revenue, that we've got to cut, cut the PFD. Even though, even though Alaskans, the overall Alaska economy would be better off by shoving a bunch of the burden to not to others, to non-residents and others, even though Alaska would be hugely better off using one of those other alternatives, and Alaska families would be hugely better off because it would lower the take from Alaska families by using one of these other methods uh to raise revenues. Even though Alaskans would be better off, they still argued that it had to be cut, it had to be done through PFD cuts for various reasons. Oh, it's free money, and you know, we got to take free money out of people's pockets first. Um, it's just it so you we've got people out there in the state who hate PFDs so much that they that they overlook alternatives that are better for the overall Alaska, hugely better, 20 20% better, hugely better for the overall Alaska economy and Alaska families. They over they they look past those alternatives because they've got it, because we've got to do it through PFD cuts. It is it is self-defeating. It is uh is it inflicting a wound uh on the Alaska economy at a time that we that we really can't afford it? It's inflicting a wound on on Alaska families, all Alaska families, because because even the upper income Alaska families would benefit from offloading a significant share of the of the burden to non-residents and others, would would would benefit from reducing the burden on the Alaska economy and on Alaska families. Even upper income residents would benefit from that. But oh no, we can't have any of that. We can't reduce the burden on Alaskans because we've got to cut PFD cuts first, no matter what. And it's just the the hatred for the PFD is just so all-consuming for some people that it just it's shocking to me. I mean, right start the starting point for me for any analysis ought to be what's best for Alaska families and what's best for the overall Alaska economy. Period. Let's figure out what the best option is for those two and let's build on that. These guys, others start from the option of, oh no, we can't have P, we can't have PFDs, we got to take that free money first. And then maybe we'll look at other things, but we got to take that free money first.

SPEAKER_01 43:09

Well, and and how much of that, Brad, is due to the fact that again, we're completely disconnected. The economies, the public and the private economies are completely disconnected so that they don't care. And secondly, they don't want to upset the Apple cart because right now they're getting all that free money pretty easily. And if they did turn to something like this seasonal sales tax or something else, people might start, might start paying attention to what's going on in the size and scope of government, and they don't want that level of scrutiny. That's really that's why they hate the PFD. It's not necessarily because they hate it per se, it's because it's their money, they get a chance to spend it. Alaskans have have kind of capitulated on it, so there's really no pushback. But if they did something else, people might start paying attention.

Performance Politics And Election Cycles

SPEAKER_00 43:56

Yeah, I think I think that's I think that's part of it, Michael. Um But I think it's also we've got this, we've got this this mantra about free money has become so ingrained in some people that that they're just going to do anything to wipe out that free money. It's got to we gotta take the free money first. What they don't understand, or they do, or if they do, they choose to ignore it, is that upper income Alaska families, oil companies, non-residents, are benefiting from free money also. If we didn't, if we didn't have the share of the permanent fund earnings that's being that's being diverted to covering the cost of government, we'd have taxes for that share of the cost of government. So this free money, they're benefiting from the free money also. What Hammond did with the with the PFD was say 50% of that, 50% to the people in terms of in per in terms of permanent fund dividend. They just want more and more of the free money for themselves by cutting PFDs and and converting it over to using it as this tax shield for taxes that they would otherwise taxes that they would otherwise pay. It it is what what I what amazes me about this is people don't focus on the impact on the overall Alaska economy of what the of what the revenue raising measure is that we're using. They don't focus on the impact on Alaska families. They don't focus on the impact on middle income Alaska families and say, look, let's do what's best for Alaska families. Let's do what's best for the Alaska economy. Start from that premise. They start from a different premise, which is let's take away that free money first.

SPEAKER_01 45:28

Yeah. No, I mean, I and I think you make a valid point when you're arguing that they are benefiting from that free money. The upper and lower incomes are benefiting because they're they're they're they're reaping the benefit of government spend without having to come out of their pocket for it. And uh I think that's a good way to look at it uh as well. Barbara, I think she synopsizes what we were just saying there. She said the PFD ensures the money is distributed based on population and not the political clout of political, particular politicians. Politicians who seek to end the PFD are seeking to pork barrel money for their district or industry or for their donor class. That's I would I would add that to the end of that, but I think that's pretty close, Brad.

SPEAKER_00 46:10

Yeah, that's that's certainly the motivation uh of a lot of of a lot of legislators and others, which is to, I mean, uh Scott Kendall uh uh expresses this every once in a while. We've got to use the PFD because otherwise we wouldn't be able to, we've got to use PFD cuts to fund government because otherwise we wouldn't be able to raise enough money if we had to use taxes, other forms of taxes, we wouldn't be able to raise enough money to fund the government, all this government stuff spending that we want to do. So we've got to use PFD cuts because that affects only middle, largely affects only middle and lower-income Alaska families. They don't have a significant voice in the process, and we can just keep taking money from them as opposed to these other revenue measures where we would have to take money from upper income and from oil companies and from others as well, who might push back on the spending. I mean, that is that is the motivation uh of many of them. But when but but you know, the the thing that just shocks me is people who ought to be concerned most about the overall Alaska economy, about about how much money Alaska is keeping inside the state and who and keeping in the pockets of Alaska families, and those who ought to be concerned about the impact of these revenue measures on Alaska families. Those who those who ought to be, that's the core thing that we ought to be concerned about, not much, not how much government is spending or not how much uh uh how how silently or how stealthily you can you can get money over to government. We ought to be concerned about the impact on Alaska's, uh, the overall Alaska economy and Alaska families. People who ought to be concerned about that aren't. They say they are, but when push comes to shove, when you have the numbers in front of you that show that all these alternatives are better than using PFD cuts, they just ignore it and and wish it away.

SPEAKER_01 47:52

And again, because it's the easy road. It's the easy road, it's the easy money, and they don't want to rock the boat. And again, they don't want people to be activated. And if there was some other form of taxation that caused people to have more skin in the game, they might start paying attention to what the size and scope of government is, and they might be a little upset about it. And they definitely don't want to rock the boat in that regard.

SPEAKER_00 48:15

Yep, yep. It's easiest for them to take it this way. I agree, I agree with that. But but you know, it's that we're just starting at the wrong end. We're starting at the wrong end of the analysis. Starting point for the analysis should be what's best for Alaska families and what's best for the overall Alaska economy. And let's go, and let's go from there.

SPEAKER_01 48:34

But Ben, that's that's presupposing that they care about what's going on in the private economy, right? As long as the government economy is protected and being, I mean, that's that that's the thing. You're right. 100% I agree. But all those Yahoos out there, they I mean, they don't really care what happens in the private economy because they don't get there's no benefit to them on it, because there's no revenue base on it from them. So it could wither and die as long as a service economy is there to provide services to the government, it's all good.

Choosing Least Harm To Middle Class

SPEAKER_00 49:06

Yeah, well, uh that's that that that's a that's a uh a prescription for death of a state. I mean, it's it you're we're seeing it in the out-migration of the middle income brackets. Yeah, we're seeing it, we're seeing the income, the the effect of not caring about their economics, other than other than what can government spend on it? What more can we spend to you know make those people stay? We're we're seeing the the effect of it. People leave, people vote with their feet. They leave, they don't come. We have we end up with 26% of the workforce coming from coming from outside as opposed to filling it, being able to fill it with people in the state. What are you watching this next week, Brad? What are you gonna be paying attention to this week here? Oh, I'm I'm gonna be interested with what Senate finance does with the Senate resources referral of the of the oil tax bill or the what's now become the oil tax bill. Are they gonna take it seriously? Are they gonna do the hard work or are they just gonna blow it off? Will Will Likowski have have essentially killed it by the huge overreach that Senate resources made and Senate finance and not doing the work that Senate resources should have done? Uh, will Senate finance blow that off? And then, you know, we're starting to get into the decisions that house finance is gonna make on the the level of spending in the operating budget and various other things. So that'll be just the next step in the process is gonna be what I'm gonna be uh interested in.

SPEAKER_01 50:29

All right, Brad Keithly, Alaskans for Sustainable Budgets. Uh that does it for us today. You can again you can find him at ak4sb.com or his weekly column every week in the Alaska Landmine. I'll post that uh article up from last Friday again so you can go back and look at the ICER analysis on that for yourself. All right, Brad, thanks so much for coming on board. Appreciate you, my friend. Thank you. Michael, as always, thanks for having me.

SPEAKER_00 50:54

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. We look forward to you joining us again next week for another edition of the Weekly Top Three.