The Juneau Empire and one Letter to the Editor were very critical of the House Bill 247 conference committee compromise enacted last week. As a former and long-time Department of Revenue employee, I believe the conference committee compromise on the oil tax credit removal legislation went as far as politically possible, and the alternative was to have no legislation enacted at all. The status quo would have continued for all of Fiscal Year 2017 or longer had that legislation failed to pass. The conference committee compromise will very likely be acceptable to Gov. Bill Walker, and on the morning of the House vote, the Department of Revenue spent lots of time lobbying for passage. The bill that passed completely phases out the Cook Inlet credits, a PCE type of incentive to increase natural gas supplies in Greater Anchorage having nothing to do with extending the life of the trans-Alaska Pipeline System. The HB 247 compromise caps annual tax credits for petroleum companies, and allows the state to show individual company financial results for the first time. There is also an Alaska hire direction. The bill cleans up the unintended consequences that benefited petroleum companies in tax legislation since 2013 and earlier. All of this would have been left to the 30th and subsequent Alaska Legislatures had this compromise failed to pass the House.
Without question, a vote of “no” on the House floor would have been easier than voting “yes,” but the job of leadership is to hammer out a positive compromise that improves our lives and responds to the challenges we have today. Leadership doesn’t afford the dogmatic luxury of self-satisfaction.
For more than a dozen years I explained the state tax regime and financial outlook to the credit rating agencies. Alaska has the most complex and dynamic oil tax system in the world with oil paying not only a profits tax (which is entirely what HB 247 deals with), but royalties, a corporate income tax and a property tax. Now, after several years of annual legislative proposals and analysis, the House leadership understands oil taxes far better than I do. Meanwhile, the rest of us rely too much upon news reporters telling us how oil is taxed and how proposed changes might work.
The pipeline has produced almost twice as much oil and lasted twice as long as originally designed and expected.
Total state income has amounted to a multiple of what was forecast not that long ago. Once the pipeline stops producing it must and will be dismantled. A handful of legislative leaders are responsible for managing the tension between maximizing annual state petroleum revenue and allowing the pipeline to remain productive in desultory times.
Tom Boutin,
Juneau