In the late 1980s, after the Alaska economy crashed amid low oil prices, state lawmakers were debating whether to tweak the oil tax structure. Times were tough and the state needed revenue. The oil companies warned that messing with taxes would only discourage them from investing in the state. One of those companies was Atlantic Richfield Co. (Arco), which years later would become part of ConocoPhillips. Arco ran a television commercial across the state, warning Alaskans that “a quick fix for today’s desires could ruin a promising future for everyone.”
It’s an interesting tidbit of history in light of Gov. Sean Parnell’s push to revamp the state’s oil tax policy created by his former boss, Sarah Palin, in 2007. The oil companies say they will spend more money on Alaska if the taxes are lowered. “We will increase our drilling activity on the North Slope, driving for new innovative ways to increase production in existing fields,” said Jim Mulva, Conoco’s chairman, last week.
Alaskans have heard these things before, and for every expert who says oil taxes are too high, there’s another to say they are too low. What is true is that Alaska remains as dependent as ever on the oil industry, with few new ideas of how to fuel jobs and the economy. Alaskans also don't pay state personal income and sales taxes. Oil prices are above $100; opportunities for new oil discoveries on state land are scarcer than they were 25 years ago; and the state depends on oil taxes and royalties to fund nearly 90 percent of government.
Should oil taxes be lowered? Should Alaskans themselves start paying taxes?
(I sure miss the "Like" option for comments offered by the old A/D layout.)
Two thumbs up to the comment posted by @eriv on April 11. Bingo. Exactly. Perfectly summed up. Private business in Alaska has made this state what it is today. Those operating those businesses know WHAT IT TAKES to meet a payroll month-after-month, year-after-year. Which is something I'm not sure many of those in Juneau--stalling and offering no solutions--know how to do (thus, their part-time employment by us, the citizens of Alaska).
Oil tax reform will most certainly lubricate the wheels of the Alaska economy, shifting precious money into the hands of Alaska's experienced, capable private businesses. Those businesses, in turn, generate jobs, make donations, field volunteers and help ensure a good quality of life for citizens in all Alaska communities.
The entire debate has focused on how much tax the state is receiving vs. profits to the oil producers and misses the point of the long term question, how much will the oil companies reinvest in Alaska new production vs. their other worldwide opportunities? According to last year's Wood MacKenzie report, Alaska ranks 117 out of 129 worldwide regions for oil & gas fiscal terms-you can choose to believe the studies or not, but the outcome of that is easy to see as the rig counts in the Gulf, Gulf Coast and Rockies climb upward as rig counts drop in Alaska-and have been for a few years now. Our fiscal competiveness is on par with Venezuela and Ecuador. Alaska state revenues will be higher in the short term under the current ACES vs. other tax plans, but if the high cost heavy oil reservoirs are never economic to develop, the long term revenues will dry up and the Trans Alaska Pipeline will reach a low flow situation where it cannot operate. $100+ oil doesn't increase investment if progressivity negates the margin. Net value projections to the state based on the Gov. bill is more than twice that of the current ACES because more oil is recoverd, it just is spread out over a longer time horizon.
In the late '80s, ARCO had ISER running around the state, with Scott Goldsmith claiming that the world would abruptly come to an end if their taxes weren't dropped.
If there were such a thing as "truth in advertising" he would have worn a leather miniskirt and clear plastic platform shoes as he hustled from forum to forum, broadcasting that message.
I went to a Wasilla Chamber of Commerce presentation where the speaker was the Chancellor of an Anchorage quasi-diploma mill, Charter College. He bemoaned the entitlement programs for the poor which he claimed were driving the state to ruin. At the same time, about 90% of his students were getting Pell grants or other forms of subsidies that were unlikely to ever result in a career. I assume he was also on the ARCO payroll in one way or another.
I went to Bakersfield right after Hazelwood floated on a wave of alcohol onto Bligh Reef. ARCO was selling Alaska gasoline for $.58 a gallon, so they could (successfully) drive the independents out of business.
Alaskan severance taxes are picayune compared to those of many countries in the world.
When oil corporations have had their taxes lowered in a variety of ways, supposedly to subsidize them to expand production or develop new fields, the facts show that it makes no difference to them at all. If anything were going to encourage them to explore, it would be $100+/bbl oil. It hasn't.
They don't need any more charity.
Alaskans should have to pay some taxes on income, though. Sales taxes are regressive. The PFD has given them what they believe is a god-given sense of entitlement.
They don't like to pay for the DOT unless they're snowed in and can't get to work. They don't like to pay for schools after their kids are grown. They don't want to pay for fire departments until brush fires are headed their way. They don't want to pay for troopers unless their cars have been stolen.
It's time to wake up and smell the coffee.
If they don't pay taxes, we're going to see more Knik Arm-type bridges to nowhere. That may make them actually care about how the state spends tax money.
"That may make them actually care about how the state spends tax money." Yes, Alaskan's care how our tax money from our oil is spent. A permananent fund distibutes the wealth more equtably then any other way. In many places there is no other cash income. And the creation of another tax just creates another money sink to get it. Each place has a choice to tax or not to tax not one big I think you all should tax yourself then I can take that money and make you beg for it back.
The answer to the question depends upon your orientation. If you believe the worthy objective is to maximize the public sector presence (including PFDs) in our state's economy you should not want to reduce taxes. If your objective is to grow the private sector then you should want to lower taxes, which create incentives (notice I didn't say guarantees) for more investment. Personally, I believe the emphasis should be on private sector jobs. The private sector isn't perfect, just less imperfect at allocating resources than the other choice. Most readers of AD probably disagree with me on that.
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