3-26-13

 

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The Political Science Association of Alaska and Alaska College Republicans presented a panel last Wednesday (i.e. 3-20-13) at the University of Alaska-Anchorage campus, targeting  the impact of today’s tax policy on future prosperity.

 

Event Chair, Portia Watson, introduced the event moderator, Dave Harbour, publisher of Northern Gas Pipelines.  He opened the evening with a question of “intergenerational equity”.  Do we want the next generation to have the opportunities we now have, and how can we achieve that goal?  How should we proceed with the allocation of our resources to assure future prosperity for our children?

 

Dr. Scott Goldsmith (NGP Photo), Professor Emeritus of Economics, contrasted the methods of financing Alaska’s operating budget with techniques used by other state governments.  Where other states support themselves with a diversified variety of taxes and fees, Alaska derives 95% of its state revenue from one source: the petroleum industry.  As production has fallen, state spending has soared creating an unsustainable model.  The question becomes how to find a balance to allow a viable economic future for coming generations.

 

Andrew Halcro, former legislator and current chairman of the Anchorage Chamber of Commerce, reviewed the politics of the relationship between the state and the petroleum industry over the last 40 years.  Oil company revenue includes a corporate income tax, property tax, royalty payment, and a severance (i.e. or, production) tax.  Progressivity of the production tax discourages investment, and Alaska’s tax structure has become punitive.  Halcro said that Alaska has become a state that pays people to live here.  Alaskans seem to have no apparent interest in reining in  government spending but are highly focused on continuance of Permanent Fund dividend checks for themselves..

 

Dr. Forest Nabors, Professor of Political science reviewed the lack of diversification in the economy and how the federal tax structure disrupts upward mobility.  The current federal tax code actually creates an assigned strata of “class” that discourages upward mobility.  He said that entrepreneurs create wealth when they’re successful, but that as a business succeeds, taxes become more punitive creating a barrier to obtaining true wealth.  The inheritance tax, he said, makes passing a successful small business to the next generation very difficult.  He noted that Alaska has few if any entrepreneurs due to such political barriers.

 

Harbour wound up the evening with comments on the Norway model of managing taxation and regulation.  “In Norway,” Harbour said, “a deal is a deal”, with tax, regulatory and environmental issues agreed to in advance of an oil company’s investment.  “In Alaska”, he said, “a deal is not necessarily a deal”.  He said that while a company’s bonus bid and lease sale royalty payments provide revenue certainty to Alaska,  the rate paid on each of Alaska’s three oil taxes can increase – even retroactively and with little notice — upon a vote of the legislature and the signature of a governor. 

 

“Some legislators demand guarantees from the oil industry in return for tax reform”, Harbour said, “but when government acts to increase taxes, no one asks “where is the industry’s guarantee from the state that higher taxes will produce improved state services?”

 

“If the state provides investors with a predictable investment climate,” Harbour said, “the coming generation can have more certainty that their way of life will be filled with as much opportunity as their parents experienced.” 

 

Harbour also asked the audience to define the word, "people", as it is used in Alaska’s constitution: "Article 8, Section 2. says, ‘The Legislature shall provide for the utilization, development, and conservation of all natural resources belonging to the State, inclucing land and waters, for the maximum benefit of its people.’"

 

"Here’s the question I would leave you with," Harbour said.  "Did the founders intend to define ‘people’ as limited to today’s generation, or does the definition include all present and future generations of Alaskan people?

 

"If the definition includes only today’s adults and kids," he said, " then their elected representatives would be right in taxing all productive businesses to the hilt, to benefit the contractors, public employees, entitlement programs and today’s other beneficiaries–even if those taxed businesses were not in business a generation from now.

 

"But," he said, "if the definition of ‘people’ also includes future generations of Alaskans — you and your kids — then today’s policies should be designed to make Alaska a good place to invest, both now and into the future."

 (Note: NGP always invites participants and knowledgeable readers to provide additions/corrections to our work.  Accuracy is one of our goals.  -ed)