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A few more tax details.
I said, I had to pay an extra $512 in federal taxes because I applied
for and donated my entire Permanent Fund Dividend in an effort to try
to help the State with its massive budget deficit.
The reason it
cost me such a whopping amount is this: My "effective" tax bracket
(after the $6,300 "Standard Deduction" and the $4,000 "Yourself"
exemption are subtracted) is 12%. But my "marginal" tax bracket is
The reason for the big "marginal" rate is due to the progressive tendency of the tax tables. This means that for every additional $100 that a person earns on top of all that they have already earned, they will have to pay the IRS $25.
Hey, why not just keep part of the PFD to cover the tax bill.
might suggest as a way for the donator to escape the weight of the tax
bite, is to simply donate only a part of his dividend to the general fund and keep a
portion of it to cover the extra tax bill. But this would involve
having to cash the dividend check or depositing it into the donator's
personal checking account. The donator probably would not know in
October 2015 as to what his exact taxes will be for the entire year of
2015. So he could wait until 2016 and figure out his 2015 taxes first.
He may then find, as an example, that he owes $512 in extra federal
taxes because of the $2072 dividend. $2072 - $512 = $1560. He
could then write a personal check for $1560 made payable to the Alaska
Department of Revenue. He could then write a letter requesting that
that his $1560 personal check be deposited into the state's general
But one problem with this is that
$512 of tax money is still leaving the State of Alaska. At least the donator is not
going into the hole, but the State is losing $512 that it could have
Another problem is that once the PFD gets into the
donator's personal checking account, psychologically, it becomes very
painful to give it up. And if it sits in one's checking account for
several months while one is waiting to see what their 2015 taxes will
be, it could be spent. It might be replenished as a person toils at
their job and earns more paychecks, but it becomes harder and
harder for a person to sit down and write a check using their hard
earned money to give a $1000 plus gift to the state government. It may
almost come to seem borderline crazy.
In my case, in March 2015, when I was filling out the 2015 PFD application, I went to the "Pick Click Give"
link and chose to give $2000 (the maximum allowable in 2015) to the
University of Alaska Fairbanks. Psychologically, it was pretty easy,
because the money that I was supposed to get was far in the distant
future (October). It was not in my hand.
At the time, no one
knew exactly how much the 2015 Permanent Fund Dividend would be. If for
instance, it would have been $1600, then the Pick Click Give people
would have latched onto $1600 of my $2000 pledge, and forgotten about
the remaining $400. In other words, I would not have "owed" $400 to Pick Click Give or to the University.
As it turned out, the PF dividend check amount was $2072, and so I received a $72 paper dividend check in the mail.
would have come in handy for buying several sacks of groceries, and it
was right there in my hand with my name on it. But I had not cashed it
and was able to summon the will power to resist it. I signed the back
of the check to endorse it and also wrote the following words below my
signature: "Payable to the State of Alaska general fund. (TO HELP CLOSE
THE STATE'S MASSIVE BUDGET DEFICIT)".
I then mailed the check to the Alaska Department of Revenue with a note of explanation. I also requested a receipt.
it wasn't too tough to send the $72 check back, because it was fairly
small compared to the entire dividend amount. By sending it back, I was
able to maintain the "purity" of my purpose. I was able to say that I did not take a cent of the dividend.
fact is, I just didn't feel comfortable taking even a penny of it,
considering the dire straits the State of Alaska is in financially. Our
state's credit rating is on the line. We are headed over the cliff if
we don't do something soon.
Is the Permanent Fund Dividend a "welfare" check?
taken plenty of Alaska Permanent Fund dividend checks over the years. I
appreciated them. They were very helpful. I did not consider them to be
"Welfare" is where government takes money (by force if
necessary) from a person who has earned that money, and then gives it
to someone who has not earned it, but who supposedly has a pressing
need for it due to their unfortunate circumstances.
Permanent Fund on the other hand gets it money from the royalty oil
that the oil companies willingly agreed to give to the State of Alaska
as part of the lease agreement to drill for oil on state land up on
Alaska's North Slope. For every 8 barrels of oil that is brought up
from deep in the ground, one of those barrels is handed over to the
state. All the oil in the ground where it has been for thousands of
years, belongs to the state (and therefore to all the residents of the
state of Alaska collectively). But the lease agreement says that every
7 out of 8 barrels that are produced, can be kept by the oil companies
(who invested and worked hard to extract the oil).
of Alaska sells its royalty oil, and deposits at least 25% of the
proceeds into the Alaska Permanent Fund as per Article 9 Section 15 of
the Alaska Constitution. Once safely within the Permanent Fund, these
oil royalty monies can be used only for income producing investments. But the earnings from those investments can be taken out
of the Permanent Fund. The Alaska Constitution (Article 9, Section 15)
says: "All income from the permanent fund shall be deposited in the
general fund unless otherwise provided by law." This was written
into the Alaska Constitution in 1976.
The Permanent Fund Dividend program was created by legislation 4 years later in 1980. It was not a "welfare" program because:
- The money that supplies the dividend checks are earnings from royalty oil money - not forcefully extracted taxes.
- The money is not taken from some hard working people and then given only to those that can demonstrate a "need" for it.
money is distributed to everyone equally, as long as they meet the
Alaska residency requirements in the PFD application form.
- The earnings from the multi-billion dollar Permanent Fund provided surplus money (money beyond the essential and proper needs of a frugal government).
- True surplus money that is owned by the people in common, may properly be dispersed to the people, if done equally and to all.
.....However, now, the surplus money is gone.
In 2015, the situation has changed.
to the crash in the price of oil, the revenues to the state have
dropped tremendously. That has resulted in a $4 billion dollar deficit
in the Alaska budget.
If it ever happens that a state income tax
is instituted on hard working Alaskan people, and if a family with a
bunch of kids moves up here, and if that family is on federal aid and
not working, then paying each member of that family a Permanent Fund
dividend check will seem eerily like a welfare payment.
Who owns the money in the Alaska Permanent Fund?
people (all the residents) of the State of Alaska own it in common.
However, they don't own it in the same way that they would own a part
of a company that they had stock in. In that case, they could sell
their stock and pocket the money and leave the state.
they could conceivably own shares of the Permanent Fund and be able to
cash out their share, if
a big majority of the Alaskan people decided to
set it up that way. The population of Alaska is about 736,000. The
value of the Permanent Fund is about $52 billion. That means that every
Alaskan's share is about $70,000.
the present time, the majority of Alaskans probably don't want to set
it up where thousands of Alaskan's could cash out their $70,000 shares
and leave the state.
The way it is now is easy come / easy go.
A person can come up to Alaska and become a 1 year resident, and
without investing a single cent, he is "granted" a $70,000 "share"
of the Permanent Fund. That's the "easy come" part. But he can't cash
his "share" out, and as soon as he moves out of the state he loses his
$70,000 "share". That's the "easy go" part.
But the truth of the
matter is, all the Alaskan people own all of the state resources and
state government buildings, roads, road graders, state pick-up trucks,
office chairs, filing cabinets, etc. We own all these things in
"common". Technically, we could collectively decide to gather up all of
the chairs in the state government office buildings and have them sold
at a big auction and divide up the proceeds to all 736,000 Alaskans
(since all the state government chairs belong to we the people).
However, we would have to buy a bunch more chairs to replace them, with
our tax money. And so we wouldn't gain anything. The whole operation
would be wasteful. We the people have to decide on the most intelligent
ways to utilize our physical assets and finite financial
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Written by Randy Griffin , PO Box 73653, Fairbanks, Alaska 99707
This page was first created on May 16, 2016.
Added to on May 24, 2016.