tag:theconversation.com,2011:/us/topics/sales-tax-51842/articlesSales Tax – The Conversation2022-10-04T17:41:18Ztag:theconversation.com,2011:article/1911472022-10-04T17:41:18Z2022-10-04T17:41:18ZA provincial sales tax is the solution to Alberta’s fiscal roller-coaster<figure><img src="https://images.theconversation.com/files/486893/original/file-20220927-18-aal63q.jpg?ixlib=rb-1.1.0&rect=29%2C0%2C6580%2C4469&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Alberta Premier Jason Kenney and Minister of Finance Jason Nixon, then Minister of Environment and Parks, chat before the throne speech is delivered in Edmonton in May 2019.</span> <span class="attribution"><span class="source">THE CANADIAN PRESS/Jason Franson</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/a-provincial-sales-tax-is-the-solution-to-alberta-s-fiscal-roller-coaster" width="100%" height="400"></iframe>
<p>With <a href="https://www.thestar.com/news/canada/2022/06/14/to-be-held-oct-6-alberta-ucp-announces-rules-for-contest-to-replace-leader-premier.html">a new Alberta premier taking office in October</a> and <a href="https://www.elections.ab.ca/elections/albertas-next-election/">a general election required by the end of May 2023</a>, fiscal policy may become a wedge issue between Alberta’s United Conservative Party and the NDP.</p>
<p>A key issue for analysts who study Alberta’s finances is the erratic behaviour of the province’s revenue stream, which is heavily tied to the price of oil. In the past year, Alberta’s finances have gone from a projected <a href="https://open.alberta.ca/dataset/6f47f49d-d79e-4298-9450-08a61a6c57b2/resource/ec1d42ee-ecca-48a9-b450-6b18352b58d3/download/budget-2021-fiscal-plan-2021-24.pdf">$18.2 billion deficit</a> to a <a href="https://www.alberta.ca/government-and-ministry-annual-reports.aspx#21-22">$3.9 billion</a> surplus. This happy result is almost entirely due to <a href="https://www.reuters.com/business/energy/alberta-ends-2021-22-with-surprise-c39-bln-surplus-higher-oil-prices-2022-06-28/">surging bitumen royalties as oil prices have risen dramatically</a>. </p>
<p>This is not an anomaly. Since 1965, <a href="https://www.policyschool.ca/wp-content/uploads/2022/01/Provincial-Government-Budget-Data-January-2022.xlsx">all of Alberta’s surpluses have been attributed to resource royalties</a>. This effectively means that, since oil royalties make up a significant amount of government revenues, Albertans have only been paying 50 to 95 per cent of the full cost of public services. Albertans have become so used to these royalties keeping taxes down that they oppose any and all mentions of a provincial sales tax.</p>
<h2>The ‘Alberta tax advantage’</h2>
<p>Alberta prides itself on being the only Canadian province without a provincial sales tax, relying instead on its bitumen revenues. Known as the “<a href="https://www.alberta.ca/alberta-tax-advantage.aspx">Alberta tax advantage</a>,” this attitude can be traced back to 1936 when a new Social Credit government <a href="https://docs.assembly.ab.ca/LADDAR_files/docs/bills/bill/legislature_8/session_1/19360206_bill-107.pdf">introduced a two per cent sales tax</a> recommended by a taxation commission. </p>
<p>Albertans were not happy with the new tax, and the government backed off collecting the tax after a year and a half. Shortly after the tax was introduced, Alberta <a href="https://www.uap.ualberta.ca/titles/208-9780888643063-politics-and-public-debt">defaulted on its debt</a> — a default that lasted nearly a decade. The default exposed huge fissures in the structure of provincial finances. </p>
<p>Albertans, overly dependent on the fortunes of wheat prices in the 1920s and 1930s, wanted all types of public infrastructure — roads, telephone systems, irrigation channels — but even in financially good times, would resist any efforts to raise taxes to pay for public works.</p>
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<img alt="An oil pumpjack sits in the foreground of a large hay field" src="https://images.theconversation.com/files/486628/original/file-20220926-17-ikb2mz.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/486628/original/file-20220926-17-ikb2mz.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=370&fit=crop&dpr=1 600w, https://images.theconversation.com/files/486628/original/file-20220926-17-ikb2mz.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=370&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/486628/original/file-20220926-17-ikb2mz.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=370&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/486628/original/file-20220926-17-ikb2mz.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=465&fit=crop&dpr=1 754w, https://images.theconversation.com/files/486628/original/file-20220926-17-ikb2mz.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=465&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/486628/original/file-20220926-17-ikb2mz.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=465&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The Alberta government relies heavily on fiscally volatile energy prices for most of its revenue.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Jeff McIntosh</span></span>
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<p>A book I recently edited <a href="https://doi.org/10.15215/aupress/9781771992978.01">about the possibility of a provincial sales tax in Alberta</a> illustrates how pervasive this attitude still is. Many Alberta politicians are hesitant to even utter the words “provincial sales tax” for fear of backlash from citizens and politicians alike. </p>
<h2>Political suicide tax</h2>
<p>As political journalist Graham Thomson documents in the book, numerous provincial finance ministers have mused about considering a provincial sales tax. Each time, the minister was directed by their premier to repudiate these musings and confirm that Alberta would not impose a provincial sales tax. </p>
<p>The fear around a sales tax is so great that PST is known by another term in Alberta — <a href="https://www.reddeeradvocate.com/news/pst-stands-for-political-suicide-tax/">political suicide tax</a>. Alberta politicians fear that advocacy, or even consideration, of a sales tax as part of their electoral platforms would result in defeat.</p>
<p>A recent Twitter argument between UCP competitors exemplifies how true this still is. </p>
<p>In July, some UCP leaders campaign researchers uncovered a <a href="https://edmontonjournal.com/opinion/columnists/smith-alberta-is-a-financial-disgrace-we-need-to-hit-the-reset-button">controversial column</a> written by UCP front-runner Danielle Smith in September 2020 that advocated a five per cent sales tax. This column, which emerged only mid-way in the UCP leadership campaign, resulted in Smith’s close competitors <a href="https://twitter.com/ToewsforAlberta/status/1548669019183616002?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1548669019183616002%7Ctwgr%5E59c2378878a6057129b96eb26496a261b0f7c18d%7Ctwcon%5Es1_&ref_url=http%3A%2F%2Fabpolecon.ca%2F2022%2F07%2F30%2Fa-sales-tax-for-alberta-and-the-ucp-leadership-race%2F">Travis Toews</a> and <a href="https://twitter.com/BrianJeanAB/status/1549768108495327232?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1549768108495327232%7Ctwgr%5E59c2378878a6057129b96eb26496a261b0f7c18d%7Ctwcon%5Es1_&ref_url=http%3A%2F%2Fabpolecon.ca%2F2022%2F07%2F30%2Fa-sales-tax-for-alberta-and-the-ucp-leadership-race%2F">Brian Jean</a> attacking her on Twitter.</p>
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<p>Toews, a former minister of finance, claimed Albertans cannot afford a provincial sales tax. Alberta’s 2022 budget, which he had a hand in creating as a minister, shows that <a href="https://open.alberta.ca/publications/budget-2022">if Albertans paid taxes at Ontario rates, Alberta’s tax revenues would be $14.9 billion higher</a>.</p>
<p>Jean, who is the <a href="https://unitedconservativecaucus.ca/brian-jean/">MLA for the Fort McMurray-Lac La Biche electoral district</a>, took the opportunity to condemn Toews for supporting a sales tax. While Toews has not advocated for one, he said in 2020 <a href="https://edmontonjournal.com/news/politics/the-timing-is-the-question-here-alberta-finance-minister-says-he-would-consider-looking-at-a-pst-after-the-pandemic-further-spending-cuts">he would consider looking at a provincial sales tax after the pandemic</a>. This comment was enough for Jean to latch onto.</p>
<p>On the other side of the political divide, former NDP premier <a href="https://www.cbc.ca/news/canada/calgary/joe-ceci-budget-business-audience-commerce-chamber-calgary-1.3540524%20https://calgary.citynews.ca/video/2022/07/27/punches-thrown-in-first-ucp-leadership-debate/">Rachel Notley and her finance minister</a> also avoided discussion of a PST during their time in office. This tells us that Alberta politicians’ aversion to taxes is not a partisan issue, but a cultural one that is deeply ingrained in Albertan identity.</p>
<p>In light of this Twitter exchange, numerous tweets, many in favour of a sales tax, followed <a href="https://twitter.com/search?q=%23yestopst&src=typeahead_click">and a #yestopst</a> emerged. Despite this, <a href="https://calgaryherald.com/news/politics/younger-albertans-more-open-to-a-provincial-sales-tax-poll">opinion polling</a> shows only a minority of Albertans support such a tax.</p>
<h2>A more stable future</h2>
<p>As it stands, it’s highly doubtful that any of Alberta’s party platforms for next year’s general election will feature a provincial sales tax. Party unity has since been restored with denials and pledges to eschew a sales tax in the midst of more pressing issues, like <a href="https://edmontonjournal.com/news/politics/danielle-smith-releases-overview-of-proposed-alberta-sovereignty-act">Smith’s controversial Alberta Sovereignty Act</a>.</p>
<p>While Alberta’s politicians have seemingly abandoned hope of ever trying to raise taxes, the province’s unstable finances will eventually force them to contemplate a provincial sales tax. Oil prices are volatile, and Alberta relies heavily on them.</p>
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Read more:
<a href="https://theconversation.com/alberta-budget-means-albertans-are-trapped-on-a-relentless-fiscal-rollercoaster-ride-177698">Alberta budget means Albertans are trapped on a relentless fiscal rollercoaster ride</a>
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<p>Since becoming a province, Alberta has been beholden to world commodity prices — wheat, oil, natural gas and bitumen. <a href="https://www.westernstandard.news/opinion/wagner-alberta-exceptionalism-and-a-distinct-political-culture/article_3b015cff-1130-51e0-a068-7d5fcf35bcd6.html">Alberta’s exceptionalism</a> has meant an addiction to public spending and aversion to taxes.</p>
<p>This contradiction has led to wild fluctuations in its fiscal position from <a href="https://www.nytimes.com/1936/04/02/archives/alberta-defaults-3200000-in-bonds-social-credit-province-first-in.html">bankruptcy in 1936</a> to <a href="http://abpolecon.ca/2016/06/27/credit-ratings/">triple A credit status as recently as 2016</a>. </p>
<p>Alberta will remain on a fiscal rollercoaster without a sales tax and Albertans will have little choice but to ride out any future storms as a result of oil-price whiplash. A sales tax — a tax that’s stable, <a href="https://doi.org/10.15215/aupress/9781771992978.01">easy to administer and costs less to collect than income taxes</a> — would provide Albertans with a better alternative. Both public and private sector workers deserve better than accepting the status quo of boom and bust.</p><img src="https://counter.theconversation.com/content/191147/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert L. Ascah does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A sales tax — a tax that’s stable, easy to administer and costs less to collect than income taxes — would stabilize Alberta’s volatile roller-coaster economy.Robert L. Ascah, Research Fellow, The Parkland Institute, University of AlbertaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1694212021-10-13T12:08:13Z2021-10-13T12:08:13ZTax or treat! State laws on candy taxation vary wildly<figure><img src="https://images.theconversation.com/files/425068/original/file-20211006-21-1s0m1x5.jpg?ixlib=rb-1.1.0&rect=241%2C66%2C3362%2C2951&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">While death may be a given, the certainty of taxes on candy depends on the state.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/VirusOutbreakHalloween/d3f3cb88b0974589b9817b89786f5c37/photo?Query=candy%20AND%20halloween&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=263&currentItemNo=2">AP Photo/Peter Prengaman</a></span></figcaption></figure><p>Halloween shoppers have many delicious decisions to make before trick-or-treaters show up at their doors. And in many states, those choices will change how much tax they pay.</p>
<p>In Illinois, for example, <a href="http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=582&ChapterID=8">residents pay a higher state sales tax rate</a> on Reese’s peanut butter cups, gummy worms and Hershey’s milk chocolate bars – 6.25% – than on Twix, Twizzlers and Hershey’s Cookies ‘n’ Creme bars – 1%.</p>
<p>Trying to distinguish between these two groups of treats may be devilishly hard for shoppers, but to the <a href="https://www2.illinois.gov/rev/research/taxinformation/sales/Pages/rot.aspx">Illinois Department of Revenue</a>, the difference is simple. The first three are candy, and <a href="https://www.illinoispolicy.org/candy-crush-illinois-slaps-sales-tax-on-snickers-but-not-twix/">the second three are not</a>.</p>
<p>This example illustrates how state sales taxes can affect taxpayers, retailers and Halloween candy shoppers in <a href="https://scholarship.richmond.edu/law-faculty-publications/1436/">unexpected ways</a>.</p>
<h2>The importance of sales taxes</h2>
<p>From states’ perspectives, there is a lot to like about sales taxes, which are the levies you pay when you buy a cup of coffee or new computer. <a href="https://taxfoundation.org/2021-sales-taxes/">Forty-five states have sales taxes</a> ranging from 2.9% in Colorado to 7.25% in California. The rate can be even higher in some cities that also have a local sales tax.</p>
<p><a href="http://www.doi.org/10.1257/aer.99.4.1145">Research has found</a> that taxpayers don’t seem to pay much attention to how much they pay in sales taxes. This makes sales taxes politically appealing sources of revenue.</p>
<p>Not only that, states don’t have to do a lot of work in the process since <a href="https://www.gao.gov/assets/690/688437.pdf">businesses must collect</a> the taxes at the point of sale, which <a href="https://perma.cc/UHQ4-TXK7">streamlines enforcement</a>. </p>
<p>For these reasons, states <a href="https://taxfoundation.org/state-sales-tax-reliance-2019/">rely heavily on sales taxes</a> to fund their governments. In 2019, <a href="https://www.census.gov/library/publications/2019/econ/g19-stc.html">sales tax accounted for about 31% of states’ tax revenue</a>, making it the second-biggest source behind income taxes.</p>
<p>However, sales taxes do raise concerns. Namely, they burden low-income taxpayers <a href="https://itep.org/wp-content/uploads/whopaysreport.pdf">to a greater degree</a> than high-income taxpayers, since the former spend a higher percentage of their disposable income on expenses that are typically subject to a sales tax.</p>
<p>People must buy food and other basic necessities to survive, making it harder for low-income taxpayers to change their purchasing habits to avoid the sales tax burden. To address this concern, many state legislatures have chosen to reduce the sales tax rate that applies to sales of certain necessities such as groceries and medical supplies.</p>
<p><a href="http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=582&ChapterID=8">Illinois</a>, for instance, lowers its sales tax rate from 6.25% to 1% for grocery purchases. Other states, like <a href="https://www.cdtfa.ca.gov/lawguides/vol1/sutl/6359.html">California</a>, exempt groceries from their sales taxes all together.</p>
<h2>States must draw a line</h2>
<p>The trick – or treat – then becomes <a href="https://www.cbpp.org/research/state-budget-and-tax/which-states-tax-the-sale-of-food-for-home-consumption-in-2017">where to draw the line</a> on which foods to exempt from the regular sales tax rate. </p>
<p>Some foods, like eggs, milk and bread, are easy to categorize as groceries. Others, like <a href="https://taxfoundation.org/how-high-are-taxes-distilled-spirits-your-state-2016/">alcohol</a> and <a href="https://taxfoundation.org/meals-taxes-major-us-cities-0/">prepared meals</a>, are easier to exclude – and often are subject to extra taxes beyond basic sales taxes.</p>
<p>But how does one deal with all the food in between those groups? For instance, is meat a necessity? How about candy?</p>
<p>One approach to this problem is to list in granular detail each food that counts as a grocery item, leaving the remaining foods to be taxed at the higher rate. Such a list would provide perfectly targeted tax relief but would demand constant and costly updating as new products make their way into grocery stores.</p>
<p>Instead of a granular method, states often take a more generalized approach, defining groceries as food for consumption off-premises – which essentially means the food is purchased to take home, not to be eaten on the spot – and everything else is not eligible for reduced sales tax rates.</p>
<p>[<em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/us/newsletters/the-daily-3?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>.]</p>
<p>Many states, like Illinois, go further and provide that certain categories of food, such as candy, also do not qualify as groceries.</p>
<p>These generalized approaches sacrifice accuracy for ease of administration but ultimately demand further line drawing. When is food purchased for home consumption? What is candy?</p>
<h2>When is candy candy?</h2>
<p>States like New York sometimes look to preparation methods to determine when food is purchased for consumption at home or on the premises. Order a bagel with cream cheese or ask for it to be toasted, and the New York Department of Taxation and Finance concludes you will be dining in – and need to pay sales tax. Skipping the toaster and other extras makes that bagel exempt because the city assumes you’re <a href="https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/food_sold_by_food_stores.htm">taking it to go</a>.</p>
<p>Illinois defines candy as sweets and confectioneries, <a href="http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=582&ChapterID=8">but not if flour is a listed ingredient</a>. A <a href="https://www.avalara.com/blog/en/north-america/2019/10/state-by-state-guide-to-sales-tax-on-candy-just-in-time-for-halloween.html">couple dozen other states</a> have similar rules, while some, such as Arizona and Michigan, simply consider candy like any other grocery item.</p>
<p>Therefore, depending on which state you live in, that cookie crunch in your Twix is doubly satisfying. It feeds your sweet tooth while also getting you a sales tax break.</p>
<p>And, yes, Twizzlers and Hershey’s Cookies and Cream both have flour in them, too.</p>
<p><em>This is an updated version of an <a href="https://theconversation.com/not-all-candy-is-candy-at-least-for-tax-purposes-123905">article published</a> on Oct. 25, 2019.</em></p><img src="https://counter.theconversation.com/content/169421/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hayes Holderness does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Whether you pay tax on your Halloween treat supply depends on which state you live in and how it defines candy.Hayes Holderness, Associate Professor of Law, University of RichmondLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1239052019-10-25T12:31:29Z2019-10-25T12:31:29ZNot all candy is candy – at least for tax purposes<figure><img src="https://images.theconversation.com/files/296035/original/file-20191008-128686-3uwk8f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A convenience store worker hands out candy to trick-or-treaters on Halloween.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Halloween-New-York/eaed15e3d36e4f28878a4b2c17355787/2/0">AP Photo/Wong Maye-E</a></span></figcaption></figure><p>Halloween shoppers have many delicious decisions to make before trick-or-treaters show up at their doors. And in many states, those choices will change how much tax they pay.</p>
<p>In Illinois, for example, locals pay a higher state sales tax rate – <a href="http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=582&ChapterID=8">6.25% versus 1%</a> – on Reese’s, gummi worms and Hershey’s milk chocolate bars than on Twix, Twizzlers and Hershey’s Cookies ‘n’ Creme bars.</p>
<p>Trying to distinguish between these two groups may be devilishly hard for shoppers, but to the <a href="https://www2.illinois.gov/rev/research/taxinformation/sales/Pages/rot.aspx">Illinois Department of Revenue</a>, the difference is simple. The first three treats are candy, and <a href="https://www.illinoispolicy.org/candy-crush-illinois-slaps-sales-tax-on-snickers-but-not-twix/">the second three are not</a>.</p>
<p>I’m a <a href="https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1997162">taxation expert</a>, and I have studied many aspects of state sales taxes. I have found that sales taxes can affect taxpayers, retailers and states in <a href="https://scholarship.richmond.edu/law-faculty-publications/1436/">unexpected ways</a>. Halloween offers a perfect window into the surprising difficulty of getting sales taxes just right.</p>
<h2>Sales tax</h2>
<p>States <a href="https://taxfoundation.org/state-sales-tax-reliance-2019/">rely heavily on sales taxes</a> for revenue.</p>
<p>Nationwide, sales taxes represent <a href="https://www.census.gov/content/dam/Census/library/publications/2015/econ/g14-stc.pdf">about a third of state revenue intakes</a>. From the states’ perspectives, there is a lot to like about sales taxes.</p>
<p>States have a great deal of autonomy in crafting their sales tax codes, and <a href="https://scholarship.law.berkeley.edu/cgi/viewcontent.cgi?article=2323&context=facpubs">taxpayers seem not to pay all that much attention</a> to sales taxes, making sales taxes politically appealing sources of revenue.</p>
<p>Perhaps most importantly, <a href="https://www.gao.gov/assets/690/688437.pdf">vendors can be relied on to collect sales taxes</a>, <a href="https://perma.cc/UHQ4-TXK7">streamlining enforcement</a> of the taxes.</p>
<p>However, sales taxes do raise concerns. Namely, they burden low-income taxpayers <a href="https://itep.org/wp-content/uploads/whopaysreport.pdf">to a greater degree</a> than high-income taxpayers, since low-income taxpayers spend a higher percentage of their disposable income on the taxes than high-income taxpayers.</p>
<p>For example, US$30 or so of sales tax on $500 of groceries strains the budget of a couple with $2,000 of monthly income more than the budget of a couple with $12,000 of monthly income. The <a href="https://fns-prod.azureedge.net/sites/default/files/media/file/CostofFoodAug2019.pdf">estimated monthly grocery bill</a> for a young couple on a low-cost plan, meaning they <a href="https://www.fns.usda.gov/cnpp/usda-food-plans-cost-food-reports-monthly-reports">spend less on groceries than an average couple</a>, is $500.</p>
<p>People must buy food to survive, making it harder for low-income taxpayers to change their purchasing habits to avoid the sales tax burden. To address this concern, many state legislatures have chosen to reduce the sales tax rate that applies to sales of certain necessities such as groceries and medical supplies.</p>
<p><a href="http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=582&ChapterID=8">Illinois</a>, for instance, lowers its sales tax rate from 6.25% to 1% for grocery purchases. Other states, like <a href="https://www.cdtfa.ca.gov/lawguides/vol1/sutl/6359.html">California</a>, exempt groceries from their sales taxes all together.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/296038/original/file-20191008-128668-1a5mtks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/296038/original/file-20191008-128668-1a5mtks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/296038/original/file-20191008-128668-1a5mtks.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/296038/original/file-20191008-128668-1a5mtks.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/296038/original/file-20191008-128668-1a5mtks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/296038/original/file-20191008-128668-1a5mtks.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/296038/original/file-20191008-128668-1a5mtks.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Some of this candy, well, isn’t.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/alameda-ca-november-17-2016-many-517744681?src=zsYYrqyAtEvkfdtXPNte4Q-1-0">Sheila Fitzgerald/Shutterstock.com</a></span>
</figcaption>
</figure>
<h2>What is candy?</h2>
<p>Now, states like Illinois must figure out where to draw the line.</p>
<p>If “groceries” are <a href="https://www.cbpp.org/research/state-budget-and-tax/which-states-tax-the-sale-of-food-for-home-consumption-in-2017">eligible for lower sales tax rates</a>, the states must define what foods qualify. Some foods, like eggs, milk and bread, are easy to categorize as groceries. Others, like <a href="https://taxfoundation.org/how-high-are-taxes-distilled-spirits-your-state-2016/">alcohol</a> and <a href="https://taxfoundation.org/meals-taxes-major-us-cities-0/">prepared meals</a>, are easy to exclude – and often are subject to extra taxes beyond basic sales taxes.</p>
<p>But how does one deal with all the food in between those groups? For instance, is meat a necessity? If so, are steaks necessities?</p>
<p>One approach to this sorting problem is to list out in granular detail each food that counts as a grocery item, leaving the remaining foods to be taxed at the higher rate. Such a list would provide perfectly targeted tax relief, but would demand constant and costly updating as new products make their way into grocery stores.</p>
<p>Instead of a granular method, states often take a more generalized approach to drawing the line. Under that approach, groceries are defined as food for consumption off-premises – which essentially means the food is purchased to take home, not to be eaten on the spot – and everything else is not eligible for reduced sales tax rates.</p>
<p>Many states, like Illinois, go further and provide that certain categories of food, such as candy, also do not qualify as groceries.</p>
<p>These more generalized approaches sacrifice accuracy for ease of administration but ultimately demand further line drawing. When is food purchased for home consumption? What is candy?</p>
<p>States like New York sometimes look to preparation methods to determine when food is purchased for consumption at home or on the premises. Have your bagel from the local deli toasted, and the New York Department of Taxation and Finance concludes you will be dining in. Avoid the toaster, and you will be <a href="https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/food_sold_by_food_stores.htm">taking it to go</a> and paying less sales tax.</p>
<p>Illinois defines candy as sweets and confectioneries, <a href="http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=582&ChapterID=8">but not if flour is a listed ingredient</a>.</p>
<p>Therefore, in some states that cookie crunch in your Twix is doubly satisfying. It feeds your sweet tooth while also getting you a sales tax break. </p>
<p>And, yes, Twizzlers and Hershey’s Cookies and Cream both have flour in them, too.</p>
<p>[ <em>You respect facts and expertise. So do The Conversation’s authors and editors.</em> <a href="https://theconversation.com/us/newsletters?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=yourespect">You can read us daily by subscribing to our newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/123905/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hayes Holderness does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Which candies count as candy in the eyes of the tax law? The answer often depends on one ingredient.Hayes Holderness, Associate Professor of Law, University of RichmondLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1202202019-07-15T10:57:08Z2019-07-15T10:57:08ZIn divided Alaska, the choice is between paying for government or giving residents bigger oil wealth checks<figure><img src="https://images.theconversation.com/files/283945/original/file-20190713-173347-1kunqej.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Students protest Alaska Gov. Mike Dunleavy's budget cuts at the University of Alaska, Anchorage campus.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/alaska-landmine/48247436282/in/photolist-2gvsHTG-2gvsHP8-2gvsHLh-2gvsHEA-2gvsg79-2gvsHvn-2gvsHti-2gvsfY8-2gvsfSr-2gvsHge-2gvsHbE-2gvsH7m-2gvsH38-2gvsfus-2gvsfp7-2gvsGLg-2gvsfen-2gvsf9n-2gvsf5e-2gvsf11-2gvseRy-2gvseNs-2gvsG9u-2gvsG2W-2gvsevU-2gvsFRA-2gvsFKt-2gvsFCz-2gvse4m-2gvsdWx-2gvsFkL-2gvsdKa-2gvsdFY-2gvsF7K-2gvsEZW-2gvsEUL-2gvsdnX-2gvsdhM-2gvsdcM-2gvsd7S-2gvsEvV-2gvscVQ-2gvscRB-2gvscMD-2gvsEa9-2gvscAb-2gvscvb-2gvscmZ-2gvschk-2gvscar/">The Alaska Landmine</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Alaskans will soon confront the dramatic effects of Republican Gov. Mike Dunleavy’s <a href="http://www.nomenugget.com/news/governor-eliminates-444-million-operating-budget">vetoes of US$444 million</a> from the state operating budget of $8.3 billion, which went into effect July 1.</p>
<p>The Alaska legislature was unable to get enough support to block the cuts through a veto override late last week. </p>
<p>The budget cuts will be immediate, <a href="https://iseralaska.org/2019/07/guettabi-provides-presentation-on-economic-impact-of-governors-vetoes/">affecting most Alaskans</a>. </p>
<p>I’m a faculty member at the <a href="https://www.uaa.alaska.edu/academics/college-of-arts-and-sciences/departments/journalism-and-communication/">University of Alaska Anchorage in the Department of Journalism and Public Communications</a> and have served on the community advisory board of Alaska Public Media. Both the university and the <a href="https://www.kcaw.org/2019/06/28/governors-veto-cuts-all-funding-for-alaskas-public-radio-tv-stations/">public broadcasting network</a> will face budget cuts. In the case of the university, <a href="https://www.npr.org/2019/07/13/741391200/alaskas-state-government-faces-big-budget-cuts">more than 40% of its state support</a> will be lost.</p>
<p>State legislators from both parties who tried to override the vetoes described a ruinous future, with <a href="https://time.com/5623042/alaska-budget-cuts/">university students bailing en masse, elderly residents moving out of state</a> and <a href="https://www.ktuu.com/content/news/Legislature-to-hold-vote-over-governors-operating-budget-vetoes-in-joint-floor-session-512441121.html">domestic violence survivors being left without emergency shelter</a>. </p>
<p>“You’re looking at Alaska at 1869 level of services,” said <a href="https://twitter.com/mattbuxton/status/1149064503939588097">Rep. Jonathan Kreiss-Tompkins</a>, a Democrat.</p>
<p>Dunleavy, who has largely avoided press interviews, told a conservative radio talk show host on July 10 that the vetoes <a href="https://www.governing.com/topics/finance/tns-alaska-budget-veto-override.html">would not “end Alaska as we know it</a>.”</p>
<p><a href="https://www.governing.com/topics/finance/gov-university-alaska-governor-dunleavy-legislature-vetoes-override-budget.html">Advocates for the university system</a>, <a href="https://time.com/5623042/alaska-budget-cuts/">the poor</a>, <a href="https://www.juneauempire.com/news/save-our-arts-juneau-artists-protest-governors-vetoes/">the arts</a>, <a href="https://www.ktuu.com/content/news/State-public-media-funding-targeted-in-Dunleavy-budget-proposal-512443012.html">public media</a> and other entities on the receiving end of the cuts rallied supporters, from <a href="https://www.alaskapublic.org/2019/07/09/portugal-the-man-returns-home-to-protest-budget-vetoes/">indie music groups</a> to <a href="https://twitter.com/Nat_Herz/status/1149376994125025280">entrepreneurs</a>. </p>
<p><a href="https://www.peninsulaclarion.com/news/even-right-leaning-groups-bankers-and-builders-are-calling-for-an-override/">Business groups, including the Alaska Bankers Association</a>, tried to persuade three-fourths of the Alaska Legislature – 45 of 60 members – to override the governor’s vetoes. In the end, <a href="https://thehill.com/homenews/state-watch/452270-alaska-political-mess-has-legislators-divided-over-meeting-place">only 37 legislators</a> stood against the governor.</p>
<p>How did Alaska, one of the country’s <a href="https://www.anchoragepress.com/news/how-we-got-here-recapping-the-history-of-alaska-s/article_2df9cb56-9207-11e9-9dd3-b7cf7f00ad72.html">richest states with a $65 billion savings account</a> fueled by oil royalties and leasing revenues, get into this position?</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/283946/original/file-20190713-173338-1y07y0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/283946/original/file-20190713-173338-1y07y0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/283946/original/file-20190713-173338-1y07y0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=455&fit=crop&dpr=1 600w, https://images.theconversation.com/files/283946/original/file-20190713-173338-1y07y0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=455&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/283946/original/file-20190713-173338-1y07y0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=455&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/283946/original/file-20190713-173338-1y07y0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=572&fit=crop&dpr=1 754w, https://images.theconversation.com/files/283946/original/file-20190713-173338-1y07y0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=572&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/283946/original/file-20190713-173338-1y07y0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=572&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The 800-mile Trans-Alaska pipeline carries Alaska North Slope crude oil from Prudhoe Bay south to Valdez.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Associated-Press-Domestic-News-Alaska-United-St-/b49f2204f8e6da11af9f0014c2589dfb/1/0">AP/Al Grillo</a></span>
</figcaption>
</figure>
<h2>‘Safe landing or nose dive’</h2>
<p>The troubles have been a long time coming. </p>
<p>As the state prepared to <a href="http://www.alaskapublic.org/2017/06/22/midnight-oil-doesnt-he-know-its-frozen-how-alaska-almost-overlooked-prudhoe-bay/">reap the benefits of its oil reserves in the 1970s</a> as the trans-Alaska oil pipeline neared completion, voters approved in 1976 an amendment to the Alaska Constitution <a href="https://apfc.org/who-we-are/history-of-the-alaska-permanent-fund/">establishing the Alaska Permanent Fund</a>. </p>
<p>The idea was to save a slice of the current oil windfall in a special fund for future generations when the oil ran out. Meanwhile, the rest of the massive oil royalties – <a href="http://www.tax.alaska.gov/programs/documentviewer/viewer.aspx?1532r">$391.5 million in 1976, more than four times the amount collected the previous year</a> – flowed into state coffers. That meant less need to rely on the traditional way government raises money: taxes. So the legislature <a href="http://www.akleg.gov/basis/get_documents.asp?session=30&docid=17151">repealed a state income tax and the Alaska school tax in 1980</a>.</p>
<p>Now, most Alaska communities have no sales tax and property taxes are low. The total state and local tax burden on Alaskans is <a href="https://www.investopedia.com/financial-edge/0210/7-states-with-no-income-tax.aspx">the lowest in the country</a>. </p>
<p>In addition to repealing state taxes, Alaska legislators in 1980 <a href="https://apfc.org/who-we-are/history-of-the-alaska-permanent-fund/">approved a payout from mineral royalties to state residents called the Alaska Permanent Fund Dividend</a>, or “PFD.” </p>
<p>The idea was that the dividend would distribute to state residents a portion of the state’s natural resource wealth belonging to them as Alaskans. </p>
<p>“The initial bonanza of oil revenues was spent like a sailor hitting port after a long voyage,” <a href="http://www.alaskajournal.com/authors/clem-tillion">wrote Clem Tillion, one of the legislators behind the PFD’s creation, in an op-ed last summer</a>. The first payment was made in 1982 and Alaskans receive roughly $1,000 every year from state government.</p>
<p>Oil supports about <a href="https://www.aoga.org/facts-and-figures/state-revenue">85% of the state’s budget</a>. One respected state economist has been warning since the late 1980s that as the massive <a href="https://www.npr.org/2017/06/24/533798430/alaskas-40-years-of-oil-riches-almost-never-was">Prudhoe Bay oil field</a> is depleted, the state faces a fiscal crisis necessitating a severe reduction in spending or a shift to different revenues. </p>
<p>“Alaska is poised for either a safe landing or a nose dive,” wrote economist Scott Goldsmith in 1992. “Whether we land safely or crash depends on <a href="http://www.akleg.gov/basis/get_documents.asp?session=29&docid=53071">how Alaskans deal with declining oil revenue.”</a> </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/283949/original/file-20190713-173347-10dbijx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/283949/original/file-20190713-173347-10dbijx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/283949/original/file-20190713-173347-10dbijx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=449&fit=crop&dpr=1 600w, https://images.theconversation.com/files/283949/original/file-20190713-173347-10dbijx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=449&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/283949/original/file-20190713-173347-10dbijx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=449&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/283949/original/file-20190713-173347-10dbijx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=564&fit=crop&dpr=1 754w, https://images.theconversation.com/files/283949/original/file-20190713-173347-10dbijx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=564&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/283949/original/file-20190713-173347-10dbijx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=564&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Alaskans often use their Permanent Fund dividends to help pay for big-ticket items like trucks.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Alaska-Dividend-Lawsuit/8e0836d44407449bb57048f32b155d42/12/0">AP/Mark Thiessen, file</a></span>
</figcaption>
</figure>
<h2>Dividing lines</h2>
<p>Other factors have compounded the state’s fiscal dilemmas. </p>
<p>The usual partisan demarcations don’t apply to Alaskans. Some of the fiercest speechmaking against Dunleavy’s budget vetoes <a href="https://www.alaskapublic.org/2019/07/12/pfd-fight-splits-alaska-gop-leaving-some-aligned-with-democrats/">came from his fellow Republicans</a>. </p>
<p>Alaskans are divided along more jagged lines, such as <a href="https://www.governing.com/topics/urban/gov-rural-urban-special-series.html">rural vs. urban</a>, <a href="https://www.espn.com/college-sports/news/story?id=3480242">Fairbanks vs. Anchorage</a>, <a href="https://www.thedailybeast.com/salmon-vs-gold-splits-alaska-gop">pro-extraction industries vs. pro-fishing</a>.</p>
<p>The divides have made it hard to find agreement, and Alaskans have been whipsawed between state leaders’ different interpretations of fiscal solutions. </p>
<p>Gov. Sarah Palin campaigned for governor and then governed from 2006 to 2009 as a <a href="https://www.wsj.com/articles/SB122002615833483595">reform-minded Republican</a> who imposed higher oil taxes. Her successor, Republican Sean Parnell, <a href="https://www.nytimes.com/2011/03/18/us/politics/18palin.html">undid that reform</a> in 2013. That prompted <a href="https://www.vox.com/2014/11/3/7150491/alaska-governor-election-2014">Palin to endorse Independent Bill Walker</a> in the 2014 governor’s race. He won.</p>
<p>By that time, <a href="https://www.macrotrends.net/2516/wti-crude-oil-prices-10-year-daily-chart">oil prices had flagged</a>. The <a href="https://www.latimes.com/nation/la-na-alaska-oil-20141216-story.html">state budget, which depended on prices higher than the mid-$40 per barrel range, fell into deficit</a> starting in 2014. </p>
<p>State leaders turned to a <a href="http://treasury.dor.alaska.gov/Investments/Constitutional-Budget-Reserve.aspx">Constitutional Budget Reserve</a> to make up the difference. </p>
<p>Walker also <a href="https://www.adn.com/politics/2016/06/29/walker-budget-vetoes-include-capping-permanent-fund-divdends-at-1000/">resorted to budget vetoes</a> to reduce the Legislature’s spending.</p>
<p>Most notably, <a href="https://www.juneauempire.com/news/the-pfd-is-1600-a-qa-about-your-dividend/">Walker reduced the amount Alaskans received from the Alaska Permanent Fund Dividend</a> in 2016, 2017 and 2018, enraging many Alaskans and inviting a state <a href="https://law.justia.com/cases/alaska/supreme-court/2017/s-16558.html">Supreme Court challenge</a> from a Democratic state senator. That challenge failed, leading to the backlash that brought Dunleavy to office in November 2018.</p>
<h2>Basic income</h2>
<p>And it’s the PFD that is <a href="https://gov.alaska.gov/dunleavy/alaska-pfd-applicants/">driving Gov. Dunleavy now</a>. He campaigned on a <a href="https://www.adn.com/politics/2018/11/08/its-going-to-be-rolled-out-pretty-quick-heres-everything-governor-elect-dunleavy-said-about-super-sized-permanent-fund-dividends/">promise to restore the full PFD and pay $3,000</a> this year. That’s an appealing promise to Alaskans who <a href="http://hurricanedavemusic.com/music-44.html">feel as if they have been deprived of their rightful dividend</a> for three years in a row. </p>
<p>The problem is that by paying a dividend of $3,000 to Alaskans, major spending reductions or eliminations to basic services must be imposed, despite rebounding oil prices and a $65 billion savings account. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/283947/original/file-20190713-173370-1v5elsg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/283947/original/file-20190713-173370-1v5elsg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/283947/original/file-20190713-173370-1v5elsg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=358&fit=crop&dpr=1 600w, https://images.theconversation.com/files/283947/original/file-20190713-173370-1v5elsg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=358&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/283947/original/file-20190713-173370-1v5elsg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=358&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/283947/original/file-20190713-173370-1v5elsg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=450&fit=crop&dpr=1 754w, https://images.theconversation.com/files/283947/original/file-20190713-173370-1v5elsg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=450&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/283947/original/file-20190713-173370-1v5elsg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=450&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Signs urging Alaska lawmakers to fund a full oil wealth fund check, known locally as the PFD or Permanent Fund Dividend, are shown Monday, July 8, 2019, in Wasilla, Alaska.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Alaska-Legislature/742a739b00c54f19a240df061b9840d7/25/0">AP/Mark Thiessen</a></span>
</figcaption>
</figure>
<p>Former Gov. Frank Murkowski, a Republican, was one of many former state leaders to lament the decision to fully fund the PFD. He predicted in an <a href="https://www.adn.com/opinions/2019/07/10/lets-step-back-and-compromise-to-protect-alaskas-economy/">op-ed in the Anchorage Daily News</a> the day the veto failed that “The Permanent Fund and its Earnings Reserve are crucial to funding a significant part of state services going forward.”</p>
<p>That fund can either pay $3,000 dividends to every Alaska resident, or it can pay for government services. It can’t do both.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/283950/original/file-20190713-173347-1583yfw.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/283950/original/file-20190713-173347-1583yfw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/283950/original/file-20190713-173347-1583yfw.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=596&fit=crop&dpr=1 600w, https://images.theconversation.com/files/283950/original/file-20190713-173347-1583yfw.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=596&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/283950/original/file-20190713-173347-1583yfw.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=596&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/283950/original/file-20190713-173347-1583yfw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=749&fit=crop&dpr=1 754w, https://images.theconversation.com/files/283950/original/file-20190713-173347-1583yfw.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=749&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/283950/original/file-20190713-173347-1583yfw.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=749&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The unusual front-page editorial in the Fairbanks Daily News-Miner on July 8, 2019.</span>
<span class="attribution"><a class="source" href="https://www.newsminer.com/news/alaska_news/alaska-legislators-brace-for-showdown-over-governor-s-vetoes/article_b6539b27-8a05-5734-9c29-fa7a61559b6f.html">Screenshot, Fairbanks Daily News-Miner</a></span>
</figcaption>
</figure>
<p>State Sen. Natasha Von Imhof, an Anchorage Republican, <a href="https://www.360north.org/gavel/video/?clientID=2147483647&eventID=2019071010&startStreamAt=780">said</a>, “I cannot fathom why the governor is purposely throwing Alaska into a severe economic recession. … The governor is cutting the budget not because we are in a fiscal crisis. It is to distribute nearly $2 billion to Alaskans to the detriment of core government services like public safety, roads and education.”</p>
<p>Few state universities, social service networks or public media systems have had to adjust so quickly to such sharp declines in state support. Wisconsin comes close, when its state universities <a href="https://www.dailycardinal.com/article/2018/10/uw-system-continues-search-for-methods-to-reconcile-budget-losses">lost $250 million in 2015 and 2016</a>. </p>
<p>Alaskans’ PFD has become an entitlement so central that it impedes clear thinking about what the state needs in 2019 and what its future will be when oil wealth can’t provide basic services anymore.</p><img src="https://counter.theconversation.com/content/120220/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paola Banchero works for the University of Alaska Anchorage and has served on the Community Advisory Board of Alaska Public Media. </span></em></p>How did Alaska, one of the richest states in the Union, end up with budget cuts that lawmakers on both sides say could wreck the state’s future? One answer’s found in three letters: PFD.Paola Banchero, Associate Professor Journalism and Public Communications, University of Alaska AnchorageLicensed as Creative Commons – attribution, no derivatives.