Chenault opposes Senate committee rewrite of in-state gas pipeline billMike Chenault, Alaska Speaker of the House, Photo by Dave Harbour – The Republic.  House Speaker Chenault told the Senate Community and Regional Affairs Committee that its rewrite of HB9 "neutered" the ability of the Alaska Gasline Development Corp., or AGDC, to advance a project. And he said it reinserts politics into efforts to bring a gas line … See all stories on this topic »

 

Debunking Detractors

(See our follow-up commentary, "In Alaska Is A Deal A Deal?")

Commentary by

Dave Harbour

Yesterday (Scroll down) we complimented the Anchorage Daily Planet for outing the "It’s Our Oil" crowd, whose web presence is "Stand Up Alaska" (SOA, also intitials for State of Alaska).  The group seeks to detract from efforts to reform Alaska taxes in an effort to improve Alaska’s investment climate.

Our investigation led us to one of the "facts" upon which the group bases its opposition to Governor Sean Parnell’s tax reform package passed by the House last year (i.e. HB 110), withering in the Senate this year in favor of an unimpressive Senate tax reform bill, SB 192. 

SOA’s website quotes from a Tax Foundation chart indicating that Alaska’s Business Climate is Second Best In the Nation.  The link SOA gives leads only to a chart, not to any narrative describing the study.  

We found that narrative on the Tax Foundation’s website, right here.  To assure that our NGP readers are not misled by SOA arguments like this, we will offer several "Fact Checks".

  • SOA’s website states that  Alaska’s Business Climate is Second Best In the Nation,  whereas The Tax Foundation website places Alaska in 4th place out of the 50 states in the "Best States Index".
  • Alaska received the 4th place out of 50 prize based on these criteria.   
    • State
    Overall Rank
    Corporate Tax Rank
    Individual Income Tax Rank
    Sales Tax Rank
    Unemployment Insurance Tax Rank
    Property Tax Rank
                 
    Alaska 4 27 1 5 28 13
  • The study criteria ranks Alaska’s corporate income tax in the middle range at 27, not exactly attractive.
  • Since Alaska has no personal income tax, we get the highest mark of 1, attractive to individual workers but not to those who have to make up the difference.
  • Since Alaska has no statewide sales tax, but a few local sales taxes, it gets a very high mark of 5.
  • As to unemployment insurance tax, we are far from the top at 28, not highly attractive to business investment.  
  • With no general state property tax rate and only several local property taxes counted, we rank at 13, not bad but not great.
  • Alaska’s discriminatory oil and gas property tax seems not to have been included in the study, and, if it had been, our property tax rank would have been much worse than 13.
  • Alaska’s predatory, progressive production tax was not apparently included in the study though it is one of the major sources of revenue to the state.  If it had been included, Alaska would necessarily have ranked much lower as a business investment haven.

Our conclusion:  The tax reform detractors should use accurate information to support their arguments.  Our readers now know that the Tax Foundation used general criteria common to most states but when applied to Alaska the general grading criteria far overestimate the attractiveness of Alaska’s investment climate–especially from the viewpoint of large natural resource industry investors (i.e. and the rest of us who depend on those large investor to support the economy and state services). 

(End note: we value the Tax Foundation’s work as a useful economic tool, as long as the criteria are carefully noted and understood.  We would hope that Alaskan interests would hire the Tax Foundation to do work specific to the 49th State, our unique economic challenges and our competitive position in the world.)