Breaking GOOD news HERE:  tax settlement improves investment climate!  North Slope Borough and ExxonMobil Alaska Production Inc. Settle Pt. Thomson Tax Appeals


Wealth takers justify their appetite for tax increases by criticizing wealth producers


Dave Harbour

Just last week

…we reported on how a hostile legislator mistreated a representative of Alaska’s largest group of taxpayers.  Here’s another take on the politician’s hostility and her bias in favor of oil tax increase advocates.

Actually, that’s no surprise.   History in Alaska and throughout the U.S. and Canada is replete with examples of how liberal politicians seeking more tax money for their constituency of beneficiaries use the art of ridicule and criticism to demean those whose constituency produces wealth for an economy.  How else, will the socialist side of the political spectrum justify taking what you make and giving it to someone or some group who will help them be reelected?

All we ask is that our readers continue to do what they do so well: follow the money.

In the instance last week, the democrat co-chair of a committee found a consultant who, for what many Alaskans consider to be a 6 month wage, if not a year’s salary, would state publicly that Economics 101 does not — in effect — exist.

Even wealth producers want to pay a reasonable tax to support the primary purposes of government.

But when “reasonable” is defined as “my voters want more benefits so just shut up and pay up or we’ll just say you are selfish, insensitive, and your executives make too much money”, one begins to wonder where it will all end.

Well, the editorial in the right column demonstrated that as taxes increased — way beyond what any fair observer would consider to be “reasonable” — so did unemployment.  

When the ACES tax was repealed, the investment climate began to improve along with employment.  Now, a low oil price environment has produced losses for the producers and government overspending has become unsustainable.

The liberal element of Alaska legislators now focuses on how to squeeze more from producers of a commodity whose low price hardly produces a profit…while keeping government operating as usual.  We have called this, “sustaining public sector jobs and entitlement programs at the expense of the private sector.”

Thousands of private sector employees continue to lose their jobs while we note that automatic pay increases for bureaucrats march on.

The Alaska Senate is wise to focus, as it is now, on 1) controlling government spending by tightening Alaska’s constitutional spending limit, and 2) using a small portion of the permanent fund annually to support the budget.  

Were that to pass, we would expect the legislature to then take a big slice out of public sector spending before resorting to statewide taxation…to show good faith.  

If the public and private sector can share the cost of maintaining government services in a just and reasonable way — without resorting to more oil tax increases — Alaska may finally have reached a point of maturity in developing a durable fiscal policy.  

Maybe Alaska can, after all, become a place where “a deal is a deal” for investors.

And if a statewide tax finally becomes the last resort let it be a statewide sales tax and not an income tax.  If everyone is affected by the sales tax, there will be a significant effort to keep it low and make sure it is used properly.  If a statewide income tax is imposed, the masses of beneficiaries can easily outvote those who pay–year after year.    


Below, we reprint our commentary on how liberal politicians attacked taxpayers in 2010!  This was when the notorious ACES –the progressive and predatory production tax — had created a toxic investment climate…and when a statewide effort to improve and/or repeal ACES to improve Alaska’s investment climate was under attack by liberal politicians 

Compare this 2010 example to how liberal politicians are treating taxpayers today (left column) in an effort to justify raising oil taxes again.  Will they never learn that when one taxes more of something, investors produce less of it and a direct result of that greed is fewer jobs, a more unsustainable budget and less long term revenue sharing for government?  (Note: we said in 2010, seven years ago, that over taxation and over spending were “unsustainable”.)

2-4-2010 Commentary: “It’s Not O.K. For Public Officials to Hurl Insults and Demonize Citizens”

Dave Harbour  
Certain Legislators are complaining that oil companies are making so much money and investing so much in Alaska that citizens have no right to petition their government for more moderate taxes.   Let’s look into it.
According to the Alaska Department of Labor, the number of Alaskan unemployed claimants in the oil and gas support sector is dramatically increasing–after decreasing until 2006: 2003-2,229, 2004-1,198, 2005-914, 2006-773, 2007-997, 2008-1,356, 2009-2,205.  Support industry jobs are like the canary in the coal mine; beware when they begin falling.  
Meanwhile, as the oil sector responsible for over 85% of the state general fund decreases along with the annual 4-6% decline in Trans Alaska Pipeline throughput, state government jobs and the state budget continue to increase without restraint.  This trend is unsustainable.  
One cannot ignore certain legislators’ efforts to criticize our oil industry neighbors and investors for making money at the same time that the state–without taking a risk or investing money–is marching away from the Prudhoe Bay wellhead with truckloads of largely unearned, million dollar bills (i.e. Royalties are ‘earned’ in the sense that companies agree following a bidding process to pay the state, as owner of the resource, for the right to develop that resource.  An oil investor would always hope that the taxes–as opposed to royalties–would remain stable for the life of the investment but that has never happened in post-pipeline Alaska history):
We are mindful that while oil company profits logically increase as the price of oil increases:
·         companies also pay more state and federal income taxes, and
·         companies pay more royalty dollars to Juneau, @ 12.5% of the wellhead value, and
·         Even under the old, flat 15% gross severance (production) tax, as prices increased, the state share increased in precise response (Then came the infamous and Draconian progressivity feature added onto the Alaska Legislature’s 2006 shift to a 25% net production tax.  Furthermore, our progressivity model is probably the most severe in the world).
We also note that when the price of oil decreases the state and local governments still collect the same—not a lower–amount of oil and gas property taxes.
Alaska’s investment climate more closely resembles that of a third world country than that of a freedom loving country.  A major reason for this is the amount of taxation and the unpredictable rate of increase of taxation.  Add those factors–along with an unfriendly government–to our economic liabilities of remoteness from the markets, harsh and expensive operating conditions and high transportation, procurement and labor costs.  
Perhaps one can appreciate, now, why insulting and demonizing the major economic engine in Alaska–which receives better treatment elsewhere in the world–is not O.K.: it is unfair, stupid and suicidal in an increasingly competitive world.  One might also appreciate why lowering the cost of investing in Alaska by some reasonable amount might be in the long term best interest of those who hope to have long term investors employing them and their children while paying for their roads, schools, public safety, social programs, power cost equalization, permanent fund and helpful government bureaucracies.
The tens of thousands of Alaska Support Industry Alliance-related employees–and the thousands more dependent on their success–are concerned about their jobs and about the withering Alaska economy.  They are right to speak out.  Furthermore, they HAVE a right to speak out.  

Legislators who are creating this cacophony of insults directed at the workers who give life to Alaska’s economy and government, should be ashamed and should apologize.