Emergency Legislation Protects Alaska at Low Oil Prices, Fixes Flaws in Current Oil Tax Structure
FOR IMMEDIATE RELEASE
March 31, 2015
JUNEAU— In the next fiscal year, the State of Alaska will be required to pay out $700 million in oil company tax credits while the state is projected to only take in $300 million in production taxes. That will result in a net loss of $400 million to the public. Senator Bill Wielechowski (D-Anchorage) and Representative Les Gara (D-Anchorage) have sponsored legislation to protect Alaska in times of depressed oil prices by adjusting the current production tax floor from 4% to 12.5%.
This increase would last for two years, which will give Alaskans time to craft a comprehensive oil tax that protects Alaska’s fiscal future and better rebuilds our surplus.
“This bill temporarily fixes a huge flaw in our current oil tax structure,” said Sen. Wielechowski. “Senate Bill 21 promised us that if we gave up billions in revenue at high oil prices, we’d be protected at low prices. Instead, we now have a $3.6 billion deficit and are paying out hundreds of millions of dollars more in credits than we are making in production taxes. This endangers our economy and must be fixed immediately.”
The proposed two year increase in the tax floor from 4% to 12.5% and cuts to certain credits will bring in an estimated $1.4 billion in additional revenue over 2015-2016. This will help extend the state’s savings and prevent dangerous budget cuts that will harm our economy. The increase in the tax floor will only apply to the largest and most profitable legacy oil fields of Prudhoe Bay, Kuparuk and Alpine. The legislation also includes a reduction to some per barrel tax credits and fixes a glaring giveaway for all future and post-2002 oil fields that a leading economist admits results in negative or near zero net present worth to Alaskans for our production taxes.
“We can fix the most glaring flaws this session, or leave Alaska on a road to recession. At a time when children, seniors and public education are being sacrificed, the oil corporations are benefitting from an oil tax law that includes provisions that produce almost no value for Alaska,” said Rep. Gara. “The massive tax break included in S.B. 21 for all future and post-2002 oil fields puts us on a pathway to poverty that will harm educational opportunities, job training and our ability to build a vibrant economy. This is a problem we can easily fix today.”
Sen. Wielechowski and Rep. Gara, along with many of their Democratic and Republican colleagues, have previously proposed a fairer minimum tax floor similar to what is included in the new emergency legislation. However, those fixes were not adopted into past legislation introduced and signed by former Governor Parnell.
Sen. Wielechowski and Rep. Gara will request expedited hearings on their legislation.
For more information contact Myer Hutchinson at 907-465-5319.