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OPINION: Oil tax reform will bring fairness to Alaska budget plan

June 16th, 2017 | By REP. LES GARA Print this article   Email this article  

Paying oil companies billions from our dwindling state savings, while cutting schools, help for seniors and those who battle disabilities, isn't an Alaska I believe in. This is one of the little-reported and major sticking points between our Republican-led Senate and our bi-partisan House Majority Coalition. The Senate budget cuts help for kids, students, seniors and disabled Alaskans, but deficit spends handsomely on subsidies for our oil industry partners.

Your voice matters to help avert a government shutdown I don't believe in. I believe in working for principled compromise. It's long past time legislators leave their ideological boxes so people don't have to fear losing their jobs.

My House Majority coalition of Republican, Democratic and Independent colleagues think schools, seniors, and a university that trains workers who'll stay in Alaska come before unaffordable oil subsidies. As does help for seniors who deserve to live with dignity, and abused and neglected children who we cannot blame for what their parents did to them.

The Senate harmfully cuts all of that, but spends over a third of a billion dollars on oil company subsidies.

Twenty-two of us in the House Majority came together this year, across party lines, to pass a deficit-ending plan that is fair to all Alaskans. We believe solving the deficit — fairly — will boost an economy businesses are wary about investing in, and which lost 7,600 jobs last year.

To make a plan fair we can't just, as the Senate wants, cut the PFD to $1,000, leave a deficit, spend more savings, and say our job is done. That only hits working and struggling Alaskans. It tells thousands of high-salaried corporate owners exempted from the state's corporate tax, and oil executives who roam the Capitol that they don't have to help with a fair budget plan.

Fairness in part requires our oil industry partners to chip in, and stop demanding unaffordable oil subsidies.

In a Finance Committee hearing this week it became clear that when the Senate gutted the House's oil reform bill, they effectively just "renamed" Alaska's unaffordable oil company cash subsidies. They've "changed" that roughly $150 million a year cost to our budget from "cashable credit" subsidies to $145 million in "deductions" oil companies will use to reduce the tax payments they owe to Alaskans. In the end, the state budget is left with the same 10-year, $1.5 billion hole.

When you put lipstick on a pig, it's still a pig.

With a third year in a row of nearly $3 billion deficits, which we have worked across party lines to partially address with $3.4 billion in budget cuts since 2013, it's past time legislators fix, and not just dabble, with a crippling deficit.

Here's why we need to fix our loophole-ridden oil tax system. We receive much less for our oil than our North American competitors in North Dakota, Louisiana and Texas, where oil taxes are much higher, and companies pay far more to private landowners for royalties and lease rentals.

At forecasted oil prices, new and most post 2003 fields pay $0 in oil production taxes no matter how profitable they are, for the first seven years of production. Those are a field's most productive years, and that's an unaffordable giveaway. If ANWR opened tomorrow, those potential high-profit fields would benefit from this $0 oil production tax giveaway.

Our oldest fields pay a "higher" but negligible 4 percent production tax. As a result, the oil tax credits and deductions we owe today basically eat away all, or almost all, of the oil production taxes we'd receive. These rock bottom 0- to 4-percent tax rates need to be replaced, now.

The House proposed, in House Bill 111, a modest 25 percent tax on oil company profits. That is fair to companies, as they pay it when they are profitable, and gets us $50 to $350 million in needed revenue at forecasted $50 to $75-per-barrel oil prices. We allow fair but affordable deductions to encourage investment in new exploration and development.

The Senate instead further reduces oil company tax payments by about $10 million per year. On top of that, they unaffordably give 150 percent more than the House in deductions (approximately $145 million per year) from company tax payments to Alaskans. That's roughly what Alaskans now pay oil companies in unaffordable subsidies.

Oil tax reform alone won't solve our budget deficit. It will help bring fairness to an overall plan. It will get fixed when one side stops telling the other, with folded arms, to give up on Alaska and say "Uncle."

Rep. Les Gara is Vice Chair of the House Finance Committee. Legislator contact information, so you can share your views, can be obtained by calling 269-0111 or going to


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