"Does It Pass The Smell/Smile Test"?
Commentary by
Dave Harbour
Last week the Alaska House of Representatives minority released a study on the fiscal effects of oil 
tax reform. The Fairbanks News Miner reported that passing Governor Sean Parnell’s (NGP Photo) proposed reform, intended to increase investment and oil production in the state, would show, "an alarming loss in revenue."
Evidence from many sources makes clear to anyone with eyes to see and ears to hear that absent reform, Alaskan oil investment will continue to diminish. The resulting lower throughput in the Trans Alaska Pipeline System (TAPS) will lead to its premature dismantlement–immediately cutting 90% of the State’s general operating revenue and threatening the economic survival of the state government and every citizen.
Only in Alaska (and, possibly Venezuela) could the rule of law 
and fiscal certainty be so viciously attacked, as when the Sarah Palin (NGP Photo) Administration and a compliant legislature dramatically increased the oil tax a half decade ago after only a few weeks of deliberation. Adding insult to injury, the Legislature made the new tax retroactive.
This treatment of the State’s largest investor group has resulted in a steady decline in Alaska North Slope legacy field exploration and development (i.e. where most of the known oil exists), hastening the early demise of TAPS.
Alaska used its lawmaking power to dramatically and retroactively increase taxes on only one class of citizen. It punished the state’s legacy investors without reasonable or just cause. The additional money wasn’t ‘needed’, just ‘wanted’. Since then, a bloated state government has continued to grow during a period of national recession. Alaska saw no need to tighten its belt when it could painlessly tighten the noose around the necks of its leading taxpayers.
Even with the State University’s economic research institute predicting a fiscal fall from grace, some of the most vigorous supporters of the production tax in question stubbornly defend the status quo. It doesn’t take a brain surgeon to understand that reforming (i.e. reducing) a tax will result in less revenue to government.
What is disturbing is that this legislative minority is not discussing the benefits to the next generation of creating a more positive investment climate–only the pain to their own, voting constituents of moderating one of the world’s worst investment areas.
We are all aghast when a thief in the night enters a home and takes cherished family treasure and memorabilia. We would say that if the thief complains when he is caught and the booty returned that his anger, "doesn’t pass any smell or smile test".
Governor Parnell’s reform package does not require that the Legislature ‘give back’ a half decade of ill-gotten gains. It only requires the Legislature to reform a vicious and punitive tax structure going forward. While reform will reduce revenue until an improved investment climate produces more revenue, the improvement can only manifest itself after several years of reform. One key to Alaskans’ economic survival is having the necessary patience.
If reform does not occur now, as we have said, minority lawmakers will have attacked defenseless, non voting Alaskan children. They will have selfishly spent ill-gotten gains on today’s constituent demands–ignoring the next generation’s needs for a strong cadre of investors who create natural resource wealth. We have labeled this sorry state of affairs, "intergenerational inequity".
When the minority participated in passing the predatory production taxes and now complain that reform would lose income to the state," we think we’ve encountered rhetoric that doesn’t pass the smell or smile test.
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