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Report Shows Oil Tax Proposal Would Cost State $1 Billion Says Gara


May 02, 2006

A report issued by the Alaska Department of Revenue this week shows tax proposals by Governor Frank Murkowski would cost the state $1 billion annually when compared to the tax rate recommended by the Alaska Legislature's lead consultant. The report compares state and oil company revenue under three oil tax proposals before the Legislature.

In March the Legislature's lead consultant, Daniel Johnston, recommended the Legislature adopt a tax rate of 25 percent. Legislative consultants say a 25 percent rate would attract additional investment, result in a competitive, lower tax than the world average oil tax, and maximize long term investment and revenue for the state.

In a news release, Gara notes that the Governor's consultant, Pedro Van Meurs, also originally considered the 25 percent tax rate attractive. Consultant Dr. Pedro Van Meurs told the House Resources Committee on February 23, 2006, "The 25/20 and the 20/20 both are very competitive systems, that you could see from the investment. If I say competitive, it means that both systems would be considered quite attractive by investors."

"Giving away tax revenue to spur investment is one thing," Rep. Les Gara (D-Anchorage) said. "Giving away $1 billion to oil companies - when your experts say it's not needed to spur investment - is just bad leadership."

The report, issued this weekend at the request of Gara and other legislators, shows the state will earn $1 billion less under the Governor's proposal, and $500 million less under the House Resources Committee's 20 percent tax proposal, than it would under the 25 percent rate recommended by Johnston.

Last month the Senate Resources Committee adopted Johnston's 25 percent tax rate recommendation, and this week's report compares revenue under that proposal to revenues under the Governor's bill, and the 20 percent proposal passed by the House Resources Committee last month. These estimates are based on the assumption of a $60 price for oil.

According to Gara, the report also shows that even under the 25 percent tax rate recommended by consultants, oil companies are on pace to net a staggering $5.7 billion in Alaska, after operation, production and development costs. The report also shows companies would net $5.9 billion under the House Resources proposal, and $6.3 billion under the more generous Governor's proposal.

Currently the House Finance Committee is considering these proposals, and the 22.5 percent proposal passed by the full Senate last month. The Department of Revenue has promised an analysis of that proposal soon.


On the Web:

Explore the Governor's Petroleum Production Tax Legislation

The full report on the proposed PPT legislation by Dr. Pedro van Meurs


Source of News:

Alaska Democrats


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Ketchikan, Alaska