Another bad idea
Senate Democrats and others who should know better simply cannot give up on the notion of sticking the oil industry with more taxes, which, in their view, would fix Alaska’s fiscal mess.
Gov. Mike Dunleavy rightly denied their request to add oil tax reform to his second special call. His reason: There was not enough time to give the question its due.
The reality: It is a lousy idea.
Milking the industry for $1.2 billion more in the belief that – presto-chango – Alaska’s problems will vanish is silly. It already has been proved wrong. Painfully. It is unclear what the senators do not understand about the axiom: tax more, get less. They certainly should understand; it is what Alaska endured for a stretch, and with disastrous results, under Gov. Sarah Palin’s miserably failed Alaska’s Clear and Equitable Share oil tax.
AGIA’s back-breaking tax structure sent industry investment elsewhere and triggered plummeting production and revenue at the same time oil provinces all over the world were booming. Senate Bill 21 thankfully put an end to AGIA, which contributed at times to a 90 percent marginal tax rate at higher oil prices. The change was vital and long overdue, but industry-haters and the Left – are they not the same? – have howled since, even trying, and failing, to have it repealed.
The consequences of irresponsibly returning to any version of a failed tax system that retards oil production, investment and revenue is staggering. It would affect us all, in every corner of the economy just as the industry is bringing online new fields on the North Slope.
Nonetheless, AGIA’s true believers say SB21 has not produced the increased oil production that was promised, while at the same time ignoring the fact that oil prices worldwide plummeted just as it went into effect, stunting production.
A real problem is that the good senators refuse to acknowledge in any way, shape or fashion that Alaska does not have a revenue problem, it has a spending problem. We spend too much. Until that is addressed – and the reluctance to do so is evident in the latest legislative spasm over Dunleavy’s budget overrides – nothing will change.
If they ever are able to resurrect an ACES-style oil tax and smack industry with a billion-dollar tax increase, investment, as before, simply will go elsewhere – and our problems will not only persist, they will worsen.