Part 7: “OIL COMPANY” WALKER, “OIL CAN” ORTIZ, AND OIL COMPANY SOCIALISM
By David G Hanger
May 05, 2016
Even when John Suter writes to complain about a Permanent Fund that is one-twentieth the size of Norway’s oil fund (actually about one-sixteenth) that is just a curious news item until that starts getting linked with the lack of funds for schools, etc., and then more or less out of the blue comes the announcement that the State of Alaska is collecting no revenues on our oil until the price exceeds $113 a barrel.
AND, OH, BY THE WAY, THE STATE NO LONGER HAS SUFFICIENT FUNDS TO PAY OUT A PERMANENT FUND DIVIDEND. Now all of a sudden we are paying attention.
That is not the best move the oil companies and their minions have made.
David Otness went further in his recent article and noted that Norway sent a delegation to Alaska as they ramped up their oil production in the North Sea to learn from our mistakes, and as consequence on somewhat lower production at more than twice the production cost Norway has established an oil reserve fund of $804 billion.
The constitutionally protected Permanent Fund totals $39.2 billion, that’s it. The earnings reserve is $13.6 billion with perhaps half of that in cash, the rest still invested. That brings the total of the account up to $52.8 billion, but that is estimated value because all of that is tied up in investments, only some of which are in the markets. From this comes the $1.5 billion for the Permanent Fund Dividend Program, and none of the $13.6 billion is constitutionally protected. The “Coghill Abomination” and GCI.com both want to consume this fund voraciously.
Let us start with an extreme example to demonstrate a simple fact. Let’s say, which did not happen by the way, that the State of Alaska over a period of 40 years spent $3 billion a year (every year) on too many bureaucrats and too much government red tape. That is an aggregate of $120 billion, so it is quite safe to say that all the profligacy of our state government does not account for a missing $700 billion. Please note also in this regard that our production costs were much lower, so had we operated under the Norway plan it is conceivable that our Permanent Fund would be in the range of $1.2 to $1.5 trillion even after we subtract $120 billion for government profligacy and waste.
OUR POLITICIANS HAVE BEEN DIRTY, CROOKED, INCOMPETENT RATS FOR A LONG TIME, SELLING OUT THIS STATE AND ITS PEOPLE FOR PEANUTS.
Since the Parnell administration they have really gotten carried away and are now out of control, and are in fact staging a massive, pre-conceived raid on the treasury of the State of Alaska. There are parallels to what Papa Pulp Mill did down here in Ketchikan. Each year LP squeezed the community for financial concessions a little harder, and as they departed LP did everything in their power to clean the town out; quite effectively at that.
But all of that was a matter of some tens of millions of dollars. What has happened up north is a matter of hundreds of billions of dollars, and if you ever wondered why BP is the second-largest company in the world, it is the corruption and the stupidity of Alaska politicians that has most to do with that sordid reality.
THE OIL COMPANIES ARE A TRILLION DOLLARS RICHER THAN THEY SHOULD BE BECAUSE OF THE INCOMPETENCE AND THE CORRUPTION OF ALASKAN POLITICIANS AND THEIR APPOINTED BUREAUCRATS.
As with Papa Pulp Mill you have all these right wingers, Coghill on down, chirping on about how the oil companies are the “job creators,” so we have to bend over and do anything they want us to do so they will stay just a little longer. The “job creators” left a big hole in Ketchikan’s wallet, and no jobs that lasted any length of time at all. THEY ARE NOT “JOB CREATORS;” THEY ARE “RESOURCE EXPLOITERS,” AND THE FIRST RESOURCE THEY WILL ALWAYS EXPLOIT ARE THEIR NEIGHBORS. THE FIRST (AND OFTEN THE ONLY) PEOPLE THEY WILL LIE TO ARE THEIR NEIGHBORS.
The deeper one gets into Sean Parnell’s career the more obvious it becomes what a crooked weasel this cretin is. For what he has designed as his legacy, SB21, does nothing less than open the state coffers to a perpetual raid on state financial reserve accounts by the oil companies using their worldwide losses and equipment purchase credits to clean us out. In five years or less the state will be broke in perpetuity if either the “Coghill Abomination” or GCI.com (Alaska’s Future) proposals remain or become state policy.
What is happening is a tax accountant’s or tax lawyer’s dream, a completely open-ended system where the super-rich are allowed, essentially whimsically, to generate ‘tax’ credits that do not just offset tax but go to the extreme of being a direct drawdown on the state treasury to the extent of hundreds of millions of dollars a year. So not only are the oil companies not paying any tax at all, which means the state’s revenue coffers are not being replenished, but they are then using the profits they have realized from our oilfields to buy all this stuff that generates these massive credits.
IT IS BASICALLY CHILD’S PLAY FROM THIS POINT FOR MANAGEMENT AND ACCOUNTING TO RUN THE BUSINESS FOR THE PURPOSE OF MAXIMIZING CREDITS TO TAKE MORE MONEY EACH YEAR FROM STATE COFFERS.
At the Federal level there are a handful of tax credits that are direct drawdowns on the Treasury. These include the earned income credit, the child tax credit, and Obamacare credits. All of these programs are politically controversial. For the most part tax credits are usable only to reduce the existing tax bill, the remainder being carried forward or back to other tax years. All of the tax credit programs the Feds have that pay out money that has not been paid in affect relatively low income individuals only, these credits being phased out as you earn more money. There is no concerted, centralized effort possible that could manipulate these tax credits, albeit on the individual level there are billions of dollars annually in fraud.
In Alaska these tax credits are for the super-rich only, and the centralized effort to manipulate these credits is inherent in the fact they have been bestowed on the oil companies only. I am not aware of any state besides Alaska that offers free money to anyone in the form of tax credits. Here these tax credits are limited exclusively to the oil companies, for their benefit rather than the State’s, are massive in that they involve hundreds of millions of dollars a year, all of which will ultimately be coming out of your bank account and your wallet. Only the oil companies in Alaska are allowed the privilege of reducing a state’s treasury by claiming massive credits against it.
“Oil Company” Walker and “Oil Can” Ortiz are correct in demanding the elimination of these credits, to which the response by the oil companies has been to ratchet up the advertising and propaganda about how the oil companies are “drowning in red ink.” Coghill and his cronies will not back down.
This regrettably is only the tip of the iceberg; it is not likely under the current tax regime that the State will collect a dime in taxes from the oil companies if the price of oil is $200 a barrel. The most corrupt aspect of this situation is the use of what is known as “worldwide apportionment,” which is exactly what it sounds like. All of the losses of all of these oil companies all over the world get to be written off against Alaska tax, not just what they are doing here in the state of Alaska.
THAT IS NOT STANDARD BUSINESS OR ACCOUNTING PRACTICE, but the State switched to “worldwide apportionment” in 1981. The cost to the treasury since that time has been billions of dollars, for the years 2012 and 2013 alone a total of $676 million.
In Part 8 I will continue detailing how this is being done and what the costs are. I think most of you see already how easily the oil companies can manipulate their tax liabilities into the indefinite future, but that subject deserves some greater detail, for it clarifies why nothing currently being proposed will save us. Two pages or so of information is enough to consume at one time, but I think all of you understand this is a very complex subject, so there is more.
As usual, forward to everyone you know and do more than that. Kick Anchorage and Fairbanks in the ass. Get your friends there to wake up to see they are going to get screwed worst of all by this madness.
Get the word out. Understand that GCI and these other propaganda outlets are using very sophisticated techniques and lots of money to convince you to turn your wallet inside out for their benefit. Collectively and individually you are smarter than that, so beat them, make sure your friends understand the message these propagandists are conveying is a total crock.
(Correction notice: In Part 6, the oil company’s profits for the years 2014 and 2015 combined are in the range of $14 to $18 billion, not for each year. My apologies for the editing error.)
David G Hanger
Received May 05, 2016 - Published May 05, 2016
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