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Hi Dave:
As you know, I have a poor opinion of politicians. They really only have one issue, ”re-election”.
This then brings us to this year and the giant problem they face. Will they act in the best interest of the state or the best interest of themselves?
For that matter, what is the best interest for the State? The spectacle of taxing our citizens while paying them dividends is to me, incomprehensible.
The obvious solution is to use the permanent fund earnings for which they were intended, to fund state government, but eliminating the dividend could be sure death for some politicians.
My prediction, for what it’s worth, is that they will do little more than talk, putting off any decision for as long as they can while hoping for a re-bound in oil prices. It’s going to be an interesting session.
Best regards and wishing you a Merry Christmas and happy new year.
Neil Bergt, Homer, Ak
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Our Commentary: Alaska faces formidable challenges.
Its oil production is a quarter of what it was a quarter century ago.
The state operating depends on oil for 90% of its operating budget and the entire economy is a third dependent on fossil fuel wealth production.
Alaska's rate of spending is unrestrained by both logic and the reality of constituent demands for more spending, more money.
Alaska subsidizes its lavish spending with available savings accounts (i.e. not including the constitutionally protected Permanent Fund) to the tune of $3.5-4 billion a year. Those available savings accounts will be depleted within two years. Thus, the legislative session beginning in January will be on of the most critical ever: with the pressures to spend facing the pressures of an insolvent government.
Government insolubility may not happen for another few years, assuming current spending practice, but — note this — the upcoming 2016 election will come sooner. Will voters support those who support their spending requests? Or, will voters support those who cut funding of their spending requests?
Place your bets now; the cards will be turned up and revealed this next November. -dh
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From a liberal friend, and our reply:
Merry Christmas, Dave!
It now looks like oil will never recover quickly enough to save Alaska from financial hardship. The more oil that moves through the pipe, the lower the price will be, so that won’t save us or the oil companies. Barring some disruption in some other country that sends the market higher on the world stage, oil will probably languish at about where it is now: not high enough for anybody. Oil companies will have a tough time with those places that cost a lot to drill (like Alaska) and shale oil looks doomed.
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Our note: In the reply below, we did not comment much on the content of our friend's opinion since we have answered similar emails from him over the past few years.
We would note, however, that:
- Higher past taxes, based on Alaska's history, would have produced higher entitlement spending, not a "bigger cushion".
- Shifting tax gun sights on the mining, timber and fisheries industries, as my friend wishes would produce very little tax. More tourist tax will produce fewer jobs and taxes. What more tax would produce would be at the expense of jobs and economic wealth production in industries that are much more "people intensive" than is the "capital intensive" oil industry.
- Liberal federal policies have already decimated Alaska's forest industry.
- Sales taxes are the fairest taxes, but become predatory when combined with a plethora of other taxes and fees — and little spending reform.
- Suggest anyone who wants to sell California glaciers first get federal and environmental activist approvals before wasting the time and money.'
- As to raising and selling cariboy and moose: same answer as the above…but add the Paris Climate Change objections to greenhouse gasses produced by flatulent herbivores.
In short, the legislature has no easy solutions, but clearly a major one is cutting the cost of spending! -dh
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So, what we should have been doing is taxing the hell out of oil when it was high so we would have a bigger cushion to fall back on.
Maybe you should begin shifting your newsletter now to the mining, timber and fisheries industries as Alaska will now have to look to them as the next cash-cow. Cutting the state budget to the bone will only cause people to leave and you remember what happened when they did that back in the late 1980s! We have to tax the resources or ourselves and we don’t seem to have the guts to tax ourselves.
Allan
PS. What about these ideas, Dave:
1. 10% tax on tourists purchases.
2. Sales tax in the summer only with rebates to Alaskans who actually live here.
3. Eliminate the Permanent Fund altogether and call the rebate from #2 above “your dividend”.
4. Sell the water from the melting glaciers to California before they melt anyway!
5. Start state run moose and caribou farms and sell the meat to the lower 48 as “certified Alaska Wild”!
Merry Christmas to you, A……., and your dear ones.
I don't ask that you love the wealth makers among us.
I only pray that the new year finds us all grateful for our comfortable lifestyles and aware of both their temporal and eternal origins and of their ultimate ends.
I further hope that we and our fellow citizens will come to fully appreciate the timeless value of honesty and fair dealing: that Alaska should become the place where "a deal is a deal", devoid of hostility and infused with good will toward all.
A stable, reputable state provides a predictable investment climate that begets yet more investor interest. Such a place does not demonize those with whom it bargains.
And may you find peace in your relationship with your Maker through His Son — and the Holy Spirit He sends to sustain, direct, and protect us as we edge closer to the portal of eternity.
Thus, you have my prayer and wish for calmness and peace in your life.
Dave
P.S. We did "tax the hell" out of oil investors and are about to do it to other industries to compensate for intemperate spending practices.
We changed/increased oil taxes about 20 times after investments were made. We created discriminatory taxes and even made some tax increases retroactive.
The approach you advocate is well established in the 49th State and is one of the reasons we are where we are today. You, I and our kids have both taught and studied in Alaska's lavish halls of education, made possible by men and women who supported our culture as they took multi billion dollar risks that we would live up to our bargained commitments and that they would find and market something that would produce returns both on and of their investments.
That said, I realize how hollow this logic may seem if one is wedded to the notion that Alaska's government should own the means, manner and all location of natural resource production. In that case, one would be advocating for socialism, a "fundamental change" in our system. And that would require a different, "ends justify means", logic which I find abhorrent, and a harbinger of worse economies to come — as socialist government throughout the ages have shown us.
Sent from my iPhone
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