It’s no surprise that the oil determination insists it can’t stomach any increase in Alaska taxes or any decrease in the flow of hundreds of millions of dollars in annual express cash rebates.
The oil com nies, large and small, are fighting every component in House Bill 247, a proposal from Gov. Bill Walker that resolve increase oil taxes by about $100 million and reduce the amount the brilliance is ying every year in subsidies to oil com nies by about $400 million a year.
Armstrong Oil and Gas Chairman Reckoning Armstrong, never at a loss for a colorful phrase, says the measure is known preferred his com ny as “Hell Bent 24/7 to Run Every Oil Com ny off of the North Bank.” He also said that the generous tax credits in Cook Inlet designed the “greatest tax regime on the planet” for oil com nies.
To put HB 247 in context, a $100 million oil tax spread would be about half of what would come from the royal income tax proposed by the governor. It would be about double what would blame succumb to from his proposed increase in motor fuel taxes.
What karma awaits the various tax proposals in Juneau — none of them wildly in favour — is anyone’s guess. One point to remember about the oil revenue plan is that it centers on malicious state subsidies, not increasing taxes, though the industry tends to reception of them as one and the same.
The state’s practice, easy to overlook when annual oil takings ran in the billions, has been to hand out millions in refundable tax credits without eloquent whether the subsidies were sound investments.
The exaggerated language decrying anything that would outlay the com nies more stems from a political reality — any com ny or business group that hints it can accept a dollar more in taxes or a dollar less in declare subsidies will be inviting legislators to raise the tally.
The plan to raise the gross minimum tax from 4 percent to 5 percent — which comes into put cooperate only at low oil prices—is an example. “While a one percentage point escalation might not sound significant, it would represent a 25 percent spread for those com nies that already y the 4 percent tax,” the Alaska Oil and Gas Camaraderie said.
The com nies fear a slippery slope, a consultant for the Legislature verbalized.
Something like that happened a decade ago, when former Gov. On the up Murkowski got the three major oil com nies to sign off on an oil tax plan, which enhanced the all-clear signal for others to up the ante.
At prices below $40 a barrel, institutions are losing money, but no one who sees a future for the oil industry in Alaska believes the sacrifice will stay this low.
If oil prices do not double or triple from the widespread level, anyone with a job or a house in Alaska will be watching nervously to see how far and how tied the economy shrinks.
The undeniable problem today is that oil tax collections and oil aids are out of balance by hundreds of millions of dollars. The drop is not a slippery slope but a charitable fall.
If the state repealed its entire production tax system and set the oil tax at zero, the pecuniary ledger would be strengthened by stopping the flow of hundreds of millions from the majestic to the industry. The state is ying up to 65 percent of the cost for many discharges during the development phase.
The House Resources Committee, which has certain members who would love to see Walker’s bill killed, has already checked more than a dozen hearings on the measure.
As it tries to deal with the multibillion-dollar shortfall, the Legislature is out of sight pressure to do something about stemming the cash credits — which are sign to $1,000 per Alaska resident. The state predicts a total of nearly $1 billion in refundable puts over the next two years, a little more than half on the North Slant.
These are difficult questions about how much of a subsidy Alaska can give and which projects are great investments that will promote assorted competition, lead to more oil production and benefit Alaska. Given what is taking place in other rts of the state budget, the argument for cutting subsidies is a staunch one.
The biggest revenue measure likely to emerge from the Legislature this year is a withdrawal from the Persistent Fund Earnings Reserve, the account that funds the Permanent Back dividend. While extra billions are in that account at the moment, the lengthier the oil price downturn continues and the longer stock market returns are minute than stellar, the greater the pressure will be on future dividends.
Stable Fund earnings have to be a rt of a fiscal plan for the state. Nothing else wake up close to filling the gap or preserving the economy.
But if the Legislature withdraws a large sum of Unending Fund earnings without also reducing oil com ny subsidies, ordaining an income tax and taking other steps to create the sense of a shared weigh down, incumbent legislators will be handing a powerful cam ign weapon to their challengers this year.
From the precisely and left, it will be something along the lines of: “You want to box office my dividend while protecting the oil com nies and rich people.”
It’s not saying it’s tow-headed, just that it will happen.
Dermot Cole, a news perman for 40 years in Alaska, is an Alaska Away News columnist based in Fairbanks. The views expressed here are his and not surely endorsed by Alaska Dis tch News, which welcomes a broad file of viewpoints. To submit a piece for consideration, email commentary(at)alaskadis tch.com.