Train About to Leave Station:

The Objective

Based on the last presidential election, the target is 36,174 votes. Getting there can happen in a few ways:

• Switching 18,087 Republican voters to Democratic ones
• Attracting 36,174 Democratic voters more than Republican ones
• Repelling 36,174 more Republican voters than Democratic ones
• Some combination of the above

So, how can those goals be achieved? The most effective strategy would be a two-pronged attack. Grow the Democratic base while undermining the GOP supporters. To accomplish those missions, we can exploit a few well documented demographics.

Political Stereotypes

Please note that stereotypes do not imply that every person matches the assumption. It simply means that it tends to be more true than false. For example, it is not true that every rich person is a Republican. But, it is true that if a person is wealthy, they are more likely to support lower taxes and smaller government than to vote for a candidate that wants to accomplish the opposite. So, we can safely assume that a policy that encourages rich people to leave the state is likely to drive away more Republicans than Democrats.

Likewise, we know that there is a tendency for people to be more conservative as they age. That doesn’t mean that every retired Alaskan votes Red. But, we can say that a policy that pushes away retirement age Alaskans is more likely to reduce votes on the right than the left.

We also know that government employees think very differently about the value they bring to society than the general population does. Consequently, public sector employees tend to support government spending more than private sector employees do. Again, that’s not to say that every government employee is a member of the Democratic Party. But, we can say that growing government would attract more Democratic voters than Republican ones.

For the same reasons, growing the private sector economy would be more likely to attract votes on the right than the left. Conversely, shrinking the private sector would likely remove more conservative voters than liberal ones. This is especially true in private sector industries that focus on resource development. A survey of oil and gas company workers is very likely to show a much higher proportion of people that aren’t nearly as concerned about climate change compared to the general population.

Finally, we know that users of government programs tend to value them more than others. Therefore, voters that receive value from those services are more likely to vote for candidates that support growing them. Again, growing the size of government is likely to attract and retain more liberal voters than conservative ones.

The Voter Implications of Taxes

Keeping all this in mind, we can conduct a mental experiment with regard to tax types. For instance, we know that increasing oil taxes will reduce investment in Alaska. This is the undeniable law of supply, which every person that took economics 101 should understand. The impact on voters comes from the fact that those investment dollars are paychecks to employees, contractors, and vendors. Therefore, a reduction in investment implies a reduction in people. Consequently, those people either don’t come to Alaska for work, or they are Alaskans that follow the investment out of state.

In either case, increasing oil taxes will result in a political impact that moves Alaska toward the left by removing voters from the right. In the extreme case, taxes that shut down production completely would result in a mass exodus of conservative minded Alaskans.

We can see a similar reaction when contemplating an income tax. Notice that income taxes fall more heavily on people with higher incomes, including retirement distributions. This is less true with a flat income tax, but the directional shift is the same. That’s not to say there aren’t very good arguments surrounding the equity of taxing the rich vs. the poor. But, we are considering the impact on the voter distribution here.

We can draw the conclusion that passing an income tax is likely to shift Alaska’s political leaning toward the left. That’s because higher wage earners and retirees have to reevaluate their net income relative to warmer and cheaper options. Consequently, anyone even contemplating retiring out of state or taking a job outside would be encouraged to move away. Again, this is basic economics.

As sales tax is more regressive than an income tax. That just means that it is more impactful on lower income earners than wealthier people. But, there is a political implication to that fact. Sales taxes are more likely to keep Alaska red, while income taxes are more likely to shift Alaska toward becoming blue.

The Voter Implications of Diverting the PFD

If we stay in the same vein, we can draw a similar conclusion from reducing the Permanent Fund Dividend. Because the dividend is not income sensitive, it is more meaningful to lower-income Alaskans than higher-income ones. For example, a $2,000 dividend represents 10% of the income if a person earns $18,000 in wages. The same $2,000 check is only 1% of a person’s income if they earn $198,000 per year.

This simple math suggests that cutting the PFD hurts lower-income voters more than higher-income ones. If we apply the same logic as before, it would appear that cutting the PFD is a losing tactic if turning Alaska blue is the goal. Yet, the debate around the PFD seems less consistent on this front than other measures.

That is to say, Legislators from the Democratic party tend to support increasing oil taxes. They also tend to support an income tax over a sales tax. That is consistent with what we should expect based on which voters those policies hurt. Yet, those same legislators tend to also support cutting the PFD. So, what gives?

The answer is found on the other side of the equation. We can’t just look at who it hurts. We also have to consider who it helps.

Using the PFD for Government Services

While it is true that the PFD is a larger benefit to blue voters than red ones, it still helps both. It also is a very different type of government check than welfare. These facts provide an opportunity for a political strategist to exploit.

If you could devise a way to divert the money sent to residents toward government programs, it accomplishes two feats. First, it changes the frame of the voters receiving the benefits. Rather than being thankful to the oil industry that supplied the funding for the dividend, they would instead be thankful to the government providing the services.

Second, this strategy results in consolidating the funding. Rather than 20% of the funding going to the wealthiest 20% of Alaskans, 100% of the money would go toward hiring government employees to provide government services — Both of which are more likely to support votes for a larger government.

Thinking about the issue this way resolves the paradox. It is internally consistent for Democratic Party members to hurt their voters with PFD cuts, but only if the offsetting impact of bigger budgets is large enough.

Using the PFD to Avoid Taxes

In general, we would expect Republican Party members to support more regressive policies. Such policies hurt the opposing party’s voters more than their own. So, why do we see so many Republican legislators pushing to save the PFD?

The answer is again found in looking at the other side of the equation. What is the alternative path? There are two main options. Either cut the budget, or raise taxes to fill the gap. Consider the first path, in which budget cuts solve the fiscal gap. If budget cuts are the goal, reducing access to funding is the means.

By distributing money to Alaskans, it takes money away from the government’s ability to spend. The implication is that if a smaller government is the goal, giving support to the opponent’s voters is a tolerable sacrifice. This is merely the inverse of the discussion we just had regarding why Democratic legislators are fine with PFD cuts that grow government. The net impacts are advantageous.

Now consider the second path, in which the size of government can’t be reduced. In this scenario, the decision point is to either cut the PFD or impose another form of taxation. From the perspective of protecting their voters when cuts are not an option, a rational Republican legislator would likely choose the more regressive option — PFD cuts.

Considering all of these factors, it becomes clear why there is a split in the Republican party on this issue. Pro-PFD Republicans want to shrink the government by taking its money away and distributing it to the people. Anti-PFD Republicans don’t believe the government can be cut, and resist the imposition of less regressive taxes in favor of the most regressive one.

Using the PFD to Grow Savings

Furthering the thought experiment, consider proactively eliminating the PFD in order to avoid future taxes. That is to say, cut the PFD to balance the budget, then cut it more to increase future investment earnings. In so doing, the call for taxes in the future could also be prevented. Stated clearly, if the Permanent Fund was large enough to fully fund the government, Alaska would never need to tax its residents. This sounds tempting to many Republicans, but there is a reason the Democratic Party also likes this idea.

Let’s imagine a world in which this idea plays out. Put yourself 50 years in the future. The Permanent Fund is $500 billion and the government that lives off investment earnings. It supports the economy by distributing that money through employment and by providing government services. The PFD does not exist and there are no taxes.

In this future, the relationship between the governing and the governed is one-directional. The government provides funding that comes from outside. The economy receives that funding, but does not contribute to it. This implies that the government has no incentive to spur economic development and feels no repercussions if it takes action to the determinant of the private sector economy.

In other states and nations, there is a direct relationship between the health of the economy and the size of the government. In this future, that relationship would not exist in Alaska. In fact, there would be no incentive for the residents to care about what the government does at all and there would be an incentive for the government to reduce the private sector economy. As long as their government jobs are safe and they don’t have to pay for the services they want, nobody would care*.

Now, contemplate how that future Alaska votes. Would an economy primarily driven by government spending, with no incentive to develop the private sector economy, vote red or blue? Add the next layer, in which the oil industry is no longer active in the state. What about now?

*Note: that is not quite the current or historic relationship between Alaskans and its government because of the oil industry and the dividend. The state cares about the economy through promoting resource development, which generates additional revenue. The people care about what the government does because of the oil industry’s economic benefit and the size of the PFD.

The Playbook

Turning Alaska blue would not take a lot. There are a few very reasonable sounding policies that would get you there. If I were designing a strategy to accomplish that goal, here is what I would recommend:

1. Increase oil taxes

The ultimate goal would be to drive the oil industry workers out of state. The first step in that direction is to reduce and prevent further investment, pushing companies into harvest mode. The slow death of the industry would be complete within a couple decades.

2. Expand the budget

The more public sector jobs and government services we provide, the more liberal minded people we will attract and retain. Bigger budgets shift the scales in favor of the Democratic Party.

3. Grow the Permanent Fund

The larger the Fund gets, the more government services Alaska can afford without taxes. By avoiding the tie between spending and taxes, the size of government can be much larger than the economy could support. The larger the public sector is, relative to the private sector, the more blue the state becomes. That means the best way to accomplish the goal is to minimize using investment earnings while collecting oil taxes or income taxes to fund the budget. In other words, avoid distributing earnings to the people, and transfer as much money to the principal account as possible.

4. Eliminate the PFD

As we discussed above, the PFD acts as a mechanism to take money away from the government and give it to the people. In other states, this might be considered a revenue surplus distribution to taxpayers. If we want to shift Alaska’s political leaning, it’s better to use that money for government services. It’s even better to use it to grow the fund while collecting other taxes to fund government growth.