“I guarantee everybody in Alaska will find something about this plan they don’t particularly care for,” Gov. Bill Walker said when he unveiled his proposal to tackle the state’s fiscal crisis. Now, 14 months later, with the Legislature poised to pass some new tax measures, those voices are making themselves heard. Instead of harmony in the chorus of complaints though, everyone is fending for themselves.
Let’s start with the oil industry. “We are looking for stability and durability,” said Kara Moriarty, president and CEO of the Alaska Oil &Gas Association (AOGA), in response to House Bill 111. If passed, the bill would establish a minimum tax that cannot be reduced by credits and raises the oil industry’s production tax from 4 to 5 percent.
Complaining about oil tax stability seems reasonable given how often it’s changed over the last decade. But the real instability for the industry is the roller coaster that crude oil prices began to ride 35 years ago. In just over six months in 1973, it jumped 250 percent before leveling off around $55 per barrel. Then in June 1980, it rose to $115 before racing downhill to under $30 per barrel.
The most recent precipitous dive is what put Alaska on the fiscal cliff. It started not long after industry backed oil tax reform was signed into law. Despite claims that it would fill the pipeline, investments and jobs on the North Slope paralleled the fall in oil prices. And still, Conoco Philips earned $233 million in Alaska last year, while globally ExxonMobil realized almost $8 billion in profits.
The lesson here is obvious. HB 111 won’t chase big oil out of the state because the primary driver of industry investments is the price of oil, not tax policy.
On the consumer side of oil is Alaska’s motor fuel tax. Right now it’s the lowest in the nation and four times lower than the national average. Gov. Walker has proposed tripling it and putting the money raised into a fund dedicated to road, airport and marine highway projects. It’s a user tax similar to the Federal Highway Trust Fund where the national gas tax is deposited. Even a taxaphobic like Senate President Pete Kelly, R-Fairbanks, can support that idea.
But Alaska Airlines, Delta Airlines and UPS are all complaining they’ll be subsidizing work at smaller airports which they don’t use. It’s a reasonable argument. But then again, every tax supports some kind of subsidy on the other side. And like the oil industry, the volatility of oil prices impacts their operations much more than a fixed fuel tax of less than 20 cents per gallon.
This tax would also hit us all the fuel pump. And Rep. Colleen Sullivan-Leonard, R-Wasilla, thinks her constituents will be disproportionately burdened because so many have jobs in Anchorage. For a vehicle that gets 20 miles per gallon, that 90-mile round trip translates to about $15 per month in new taxes, or two to three times more than the average driver.
The flip side of her argument is that by driving more, Mat-Su commuters cause more wear and tear of the road system than the average driver. So if it’s a user tax to fund road maintenance, they should pay more than most of us.
Either way, it’ll be a lot easier to pay 16 cents per gallon more in taxes then when a gallon of gas was selling at more than $4 per gallon. And it’s not a big enough tax increase to cause anyone to move down south.
There are other reasons some Alaskans might be pushed in that direction. According to the Alaska Trust Company (ATC), attorneys, accountants, managers and their assistances could lose their jobs if the state imposes an income tax on all trusts administered here. Most of those belong to non-Alaskan residents. If that tax shelter is eliminated, ATC warns, “those trusts will leave the state and virtually no tax will be collected. It will cause individuals who work here to lose their jobs and they too will leave, meaning Alaska will not be able to impose an income tax on them.”
That’s just a sampling of objections that legislators are hearing. Spreading the pain gives everyone an equal opportunity to be a victim. It may be a popular role to play right now, but it’s not at all flattering.
A better approach is to be thankful for the decades in which we’ve been the lowest taxed people in the country. And even if that long run is coming to end, it doesn’t change the fact that Alaska is the most remarkable place in America to live.
Rich Moniak is a Juneau resident and retired civil engineer with more than 25 years of experience working in the public sector.
