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
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
"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
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
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