4-17-17 Alaska’s Leaders Bring State To Edge of Fiscal Crisis Cliff — TAX HEARING TONIGHT!

Comment:  In addition to increasing oil taxes in a low oil price era, the Alaska State House of Representatives is advocating recreating an Alaska income tax in an effort to maintain its outrageous, deficit spending on public employees and entitlement programs.  We heartily endorse the comments of the State Senate President, below.    PLEASE SEE THE MESSAGE BELOW FROM CARL PORTMAN (i.e. NGP Photo), RESOURCE DEVELOPMENT COUNCIL FOR ALASKA RE: TODAY’S TAX HEARING!  -dh


News from the Alaska State Legislature, the Office of Senate President Pete Kelly

JUNEAU – (Last week), on the 89th day of the legislative session, the Alaska House of Representatives narrowly passed a bill, HB 115, that would impose an income tax on working Alaskans in the midst of a recession. In response, Senate President Pete Kelly (R-Fairbanks) released the following statement.

“The House is a co-equal chamber of the legislative branch, therefore, we plan to give the income tax proposal a fair hearing. That being said, reaching into the pockets of working Alaskans – when the state is in the grips of a recession – is absurd on its face. The state lost 9,000 jobs last year, and is expected to lose thousands more this year. This is the worst possible time to penalize people for having a job.

“The Senate Majority’s solution solves the state’s fiscal problem without taxes, which begs the question: why would we impose an income tax on working Alaskans when we don’t need to?

“As I’ve said many times, the only thing standing between Alaskans and an income tax is the Senate.”


Alaska House votes to levy income tax, sending bill to a hostile Senate
The Alaska House voted Saturday to institute a state personal income tax geared toward high-earners…


TODAY’S TAX HEARING: From Carl Portman, Resource Development Council for Alaska.  

Carl Portman, Resource Development Council for Alaska. Northern Gas Pipelines file photo by Dave Harbour

This a reminder that the Senate Resources Committee will hold a public hearing this evening on HB 111, which recently passed the House by a razor-thin margin. The bill, if it becomes law, would triple oil taxes at low prices, similar to the old, failed ACES tax system, which did the same at high oil prices. Today’s public hearing will begin at 5:00 p.m. at your local Legislative Information Office. 

The new version of HB 111 represents a very significant increase in taxes that was worse than the previous version from the House Resources Committee. It essentially is a re-write of the current voter-approved tax regime, which has attracted major industry investment and resulted in the first year-over-year increase in North Slope production in 14 years.

HB 111 will weaken Alaska’s competitive position for attracting the investment required to develop major new prospects and increase production. The bill is a sharp increase in taxes at low prices, which is a sure recipe for more economic contraction. 

Please present brief testimony opposing HB 111. Arrive at least 15 minutes early to expedite the sign-in process. Remarks must be concise as testimony is limited to 2 minutes. Please encourage your friends and colleagues to speak out against the bill. If you testified earlier on the bill, THANK YOU! However, given this is the first hearing in the Senate, it is critical you express your opposition to this new version of HB 111. If you are not able to attend the hearing, please call in to 844-586-9085 at the start of the hearing to testify. A third option is to email members of the Senate Resources Committee and your legislator to let your voice be heard: http://www.akleg.gov/basis/Committee/Details/30?code=SRES.      

For a list of Legislative Information Office locations, visit: http://akleg.gov/lios.php

Points to consider for your testimony:
•The new version of HB 111 will push Alaska to the bottom of the competitive rung and will drive away new investment dollars, forcing more job loss, deceasing oil production and deterring investment in Alaska’s oil fields.

•Alaska cannot increase oil production by increasing taxes. Alaska cannot tax away the industry’s incentive to invest and still expect to have a sustainable economy.

• While it is tempting to collect every dollar possible from the oil industry through increased taxation, doing so makes Alaskan projects less competitive with those elsewhere and robs the companies of the investment capital they require to expand existing fields and discover new ones. In the long run, increasing taxes on the industry will do more harm to Alaska’s economy. Conversely, more investment means more production, more revenue for the state, and more jobs for Alaskans. 

• The oil industry has traditionally accounted for 88 percent of Alaska’s General Fund revenues and is the largest property tax payer in the North Slope Borough and Kenai Peninsula Borough. Even in these times of low oil prices, oil provides 67 percent of the state’s unrestricted revenues and supports one-third of our economy.

• Alaska cannot control the price of oil, but it can control what kind of business climate we create here: one that encourages continued investment and more oil for TAPS. 

• Under the current oil tax system, Alaska’s share is higher than the producers’ at every price point. In fact, the state gets paid even when companies are operating at a loss because it still collects royalties, property tax, and a gross production tax. 

• Oil tax reform in 2013 made Alaska more competitive and a more attractive place to invest. Oil companies have responded with over $5 billion in new projects. Alaska saw no production decline in 2014, a slight dip in 2015, followed by the first production uptick in 14 years in 2016. Oil tax reform played a significant role in the production increase in 2016.

• New oil plays by ConocoPhillips, Caelus, and Armstrong could trigger a major reversal in TAPS throughput by adding up to 550,000 barrels per day of new oil into the pipeline with commensurate economic benefits across the state. Maintaining a stable tax policy with incentives to invest is key to seeing these projects come into production.

• It takes an annual industry investment of $3 to 4 billion to keep production levels stable on the North Slope. This requires a durable and competitive tax policy to fund Alaska projects.

• The Department of Revenue conceded HB 111 represents a significant tax increase, but has failed to produce any models of economic impacts to jobs, oil production or the state’s economy.

• At $70 oil, HB 111 would increase taxes by approximately $2.5 million per day or about $900 million a year at current production levels. That’s about what it would cost ConocoPhillips to build the Greater Mooses Tooth-1 project in NPR-A.


 

For those who wish to remember history…

…we submit this video of a unique press conference featuring the entire leadership of Alaska in 1981.On that special day, Governor Jay Hammond and Lawmakers agreed that with passage of the week’s legislation, Alaska had achieved a acceptable share of Prudhoe Bay oil revenue (i.e. which some considered a “fair share”).  Evidence of the durability of that fiscal regime is that, after a decade of annual oil tax increases,  Alaska experienced two decades ot tax stability — until the early 2000s when volatile prices, declining production and increased spending caused both Governor Murkowski and Governor Palin (i.e. albeit for different reasons) to promote changing a stable, 15% severance tax to a progressive, production tax.

The legislation also repealed Alaska’s statewide individual income tax.  Without doubt, had that revenue stream not been eliminated, the growth of government would have been greater and today’s fiscal crisis would have been more threatening.

The current House of Representatives action to increase oil taxes and recreate a personal income tax signals its ignorance of the new era of uncertainty and economic damage such action would produce.

-dh 


 

 

By | 2017-04-17T15:31:52+00:00 April 17th, 2017|Alaska Taxes, Alaska's Fiscal Crisis, Commentary|2 Comments

2 Comments

  1. Kaye Laughlin April 21, 2017 at 5:37 pm - Reply

    My husband “traded duty” with a friend who was captured on the USS Pueblo. We were in Japan. My husband knew about it the night before we (wives of crew members) heard the news on the military news – U S Armed Forces Radio Network.

    • wpnorthern April 22, 2017 at 12:52 pm - Reply

      Thank you, Kaye, for taking the time to write.

      Hopefully, by sharing these experiences with our families, friends and colleagues, they will better understand the critical challenge we — and other United Nations allies — face on the Korean Peninsula.

      Dave

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About the Author:

Dave Harbour, publisher of Northern Gas Pipelines, is a former Chairman of the Regulatory Commission of Alaska, a Commissioner Emeritus of NARUC, NARUC's Official Representative to IOGCC and Vice Chairman of NARUC's Gas Committee. He served as Gas Committee Chairman of the Western Conference of Public Service Commissioners. He also served as commissioner of the Anchorage Bicentennial Commission and the Anchorage Heritage Land Bank Commission. He earned a Bachelor of Arts Degree: English, at Colorado State University,p a Master of Science Degree: Communications-Journalism at Murray State University and graduated from Utility Regulatory School for Commissioners at Michigan State University. He served as a Vice President for Communications and Public Affairs at Alaska Pacific University, taught bank marketing classes at the University of Alaska and was an English teacher at Los Alamos High School. Harbour served in ranks of Private - Captain during a 4-year assignment with the Army in Korea, Idaho, Georgia and Fort Meade and received the Meritorious Service Medal among other commendations. Harbour is also a past Chairman of the Alaska Council on Economic Education, the Alaska Oil & Gas Association Government Affairs Committee and the Anchorage Chamber of Commerce. He is a past President of the American Bald Eagle Foundation, Consumer Energy Alliance-Alaska and Common Sense for Alaska. He was instrumental in founding the American Bald Eagle Research Foundation, the Alaska Support Industry Alliance, the Downtown Anchorage Association, and Arctic Power. He also served as CEO of several small Alaska organizations, including the Anchorage Parking Authority and Action Security, Inc. Harbour is also Chairman Emeritus of the Alaska Oil & Gas Congress and past President of the Alaska Press Club. His wife, Nancy, is a professional, performing arts administrator and his three boys, Todd, Benjamin and William work in the fields of environmental management, energy marketing and medicine.