Mining tax legislation follows path of oil tax

The Alaska House Resources Committee has approved a small increase in the state’s mining tax, sending the bill to the House Finance Committee for further approval.

House Bill 253 is one of nine revenue bills proposed by Gov. Bill Walker as part of a plan to eliminate the state’s $4 billion annual deficit by 2018.

According to the governor’s plan, the mining tax hike would raise $6 million in additional revenue. The House Resources Committee, however, had different plans. Just as it did with a Walker proposal on oil and gas taxes, the committee reduced the proposed hike out of fear that it would affect the industry.

“It’s about making sure we’re taking these steps carefully,” said Rep. Bob Herron, D-Bethel and a member of the committee. “We’ve got to be careful about the whole economy.”

According to a preliminary estimate provided to the resources committee, the revised HB 253 will raise about $3 million per year, half the revenue of Walker’s original proposal.

The committee’s bill does call for a working group to study the issue of mining taxes to determine how the state can raise additional revenue without adversely affecting the industry.

Alaska’s mining tax, unlike the state’s approach to oil and gas, is a tax on profits. It doesn’t take effect until a mine makes money. Walker proposed raising the state’s tax rate from 7 percent to 9 percent on mines making more than $100,000 per year. He also proposed eliminating the state’s exploration tax credit and instituting a mining license application fee.

The committee halved the tax increase, to 8 percent, and kept the exploration tax credit. An amendment by Rep. Paul Seaton, R-Homer, ensures that the credit cannot be applied to the state’s mining royalty, just its taxes.

The governor also proposed removing a 3 ½-year tax holiday for new mines. When a mine starts producing, the state doesn’t tax it for that period. The committee kept the holiday in place.

Members of the Democratic-led House Minority proposed several amendments that would have rolled back some of the committee changes. All were defeated.

Rep. Paul Seaton, R-Homer, also suggested some amendments. One would have created a new tax bracket for the nine mines in the state that earn more than $1 million in profits per year.

Those include Kensington and Greens Creek near Juneau.

Seaton’s amendment was defeated in a 3-5 vote.

“If we’re not going to tax … the most profitable ones, then that means we’re going to be taking more of the Permanent Fund Dividends,” Seaton said after his amendment was defeated. “If we’re not doing it here, we’ll need to contemplate it for the future.”

Speaking a few hours before the passage of the bill out of committee, Herron said the resources committee’s word isn’t the last one.

“There’s five more stops in the Legislature,” he said. “It’s a beginning, but I think the Resources committee wants to do these (tax increases) carefully.”

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