Mining tax increase gets first hearing in Legislature

The state of Alaska has never changed its mining taxes.

To find the last time Alaskan miners had to open their tax books, you have to look back before statehood, before even the Alaska Constitution.

“It hasn’t been changed since 1955,” Deputy Revenue Commissioner Jerry Burnett told the Senate Resources Committee in a Wednesday hearing. “It predates statehood.”

With the state’s deficit rising closer to $4 billion per year with every day that oil remains below $30 per barrel, Gov. Bill Walker has proposed raising a wide variety of consumption taxes, including the tax on the state’s mines. None of the consumption taxes will close the gap on their own, but combined they will make a difference, Walker has said.

The governor’s mining proposal would raise the tax rate for the largest mines (those with a net income of $100,000 or greater) from 7 percent to 9 percent. The 3½-year tax exemption for new mines would be eliminated, and there would be a fee for tax licenses, something that would affect mines of all sizes.

According to state documents, the existing mining tax collected $38.6 million in 2015. The increase would collect another $6 million per year.

Sen. Cathy Giessel, R-Anchorage and chairwoman of the resources committee, asked whether it makes sense to raise taxes on mines, even as mineral prices have fallen, forcing the temporary closure of the Nixon Fork Mine near McGrath.

Burnett responded that the tax is on net income, not gross income, so “as the economic factors go down, it will reduce the tax.”

“Certainly an additional tax … would accelerate those economic factors,” Giessel said in turn.

Sen. Bert Stedman, R-Sitka, said Alaska “virtually has no mining tax for all practical purposes,” and the state’s tax structure isn’t preventing business from opening.

He said he feels transportation and permitting issues are the biggest obstacles for many of the state’s mines.

Sen. Peter Micciche, R-Soldotna, and other members of the committee said they were concerned about the elimination of the new-mine tax exemption.

“I hope we’re not disincentivizing exploration,” Micciche said.

The Senate Resources Committee is scheduled to meet again at 3:30 p.m. Monday to discuss an increase in the state’s fisheries taxes. The mining tax bill, SB 137, had not been scheduled for another hearing as of Thursday afternoon.

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