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Alaska lawmakers pass, repeal hike in oil tax


May 09, 2006
Tuesday AM

Juneau, Alaska - House lawmakers Sunday night narrowly voted to increase the tax rate on oil to 21.5 percent, but rescinded the action a short time later.

The flip-flop reflected intense political maneuvering on a sweeping oil tax reform bill under debate in the House.

The bill, when it first hit the House floor Saturday, contained a 20 percent tax on oil company profits, the same rate Gov. Frank Murkowski proposed. The Senate passed a bill April 24 with a 22.5 percent tax rate.




House Democrats on Sunday failed in efforts to ratchet up the tax rate to 25 percent. They also failed to keep the method of taxation as it is today - on the gross value of oil coming out of the ground rather than on company profits. The Democrats said such a change would be too great a financial risk for the state.

Debate on the bill to reform the state's oil tax system was expected to continue deep into the night, and lawmakers were expected to grapple with many more amendments.

With only two days left before the Legislature is scheduled to adjourn for the year, House Speaker John Harris, R-Valdez, wielded a strict gavel, forbidding members from leaving the chamber except for restroom breaks.

Lawmakers on both sides of the aisle seem determined to raise taxes on the oil industry, which is enjoying record profits and, in the view of the governor and many legislators, is hauling too much cash out of state.

The question that has gripped the Capitol since February, when Murkowski first proposed hiking taxes, is how high the tax rate should be and how best to revamp the state's tax code to encourage more exploration and development of new oil and gas supplies. The state, which relies almost solely on oil for its general fund revenue, currently produces about 900,000 barrels of crude a day, but that's less than half of peak production in the late 1980s and output is slipping rapidly.

But with oil prices running above $60 a barrel, a tax increase could raise an estimated $1.6 billion a year in extra revenue under the bill the House is considering. State revenue would fall during times of low oil prices, however, under the bill.

Democrats argue the governor, as well as the Republican legislative leadership, are settling for too little. Sunday they seemed to be working toward delay, perhaps seeing some advantage in pushing the oil tax debate into a special session the governor might call once the Legislature adjourns for the year Tuesday.

"My personal preference is to wait a little bit because it is so complex," said Anchorage Rep. Ethan Berkowitz, the House minority leader.

He and other Democrats said the state might be making a terrible mistake in converting its oil tax system from one that calculates the tax based on the gross value of oil to one that taxes company profits.

Figuring out what constitutes profits and costs for oil companies might be too difficult, they said.

Rep. Ralph Samuels, R-Anchorage, said too much emphasis had been placed on the rate of taxation and too little on the possible benefits the revamped tax system might yield.

He said state auditors would be able to use federal tax returns and information about how companies bill one another for shared costs to fully collect the taxes owed. The companies don't allow one another to cheat on costs and the state can piggyback on that, he said.

"I guarantee you, they do not trust each other at all," he said.

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Scripps-McClatchy Western Service,

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Ketchikan, Alaska