By John Binkley
July 11, 2006
This should come as no surprise considering the Legislature rejected Murkowski's proposed PPT in the four-month regular session and again in the month-long special session. Now Murkowski has called the Legislature back to Juneau for another 30 days even though there are no indications the results will be any different. He desperately needs a PPT to be passed in order to help his re-election campaign.
The problem is the proposed PPT creates a whole new tax system that is confusing and untested, both in practice and in the courts. Alaska went through years of litigation with oil companies over our current severance tax system. It could take legions of lawyers and accountants and more years of court battles before any new PPT law could finally be settled. The uncertainty of a new system would make our State revenues more unstable, and unpredictable. PPT rewards companies for aggressively claiming deductions and forces the State to hire additional state employees to focus on lawsuits and audits.
It's a shame to waste legislators' time and our money laboring over Murkowski's fatally flawed PPT in yet another special session. The legislature should reject PPT once again and consider a tax system that is fair and simple.
I have a simple solution.
My plan includes four changes to the existing severance tax:
First, we need to eliminate the economic limit factor (ELF), and charge a flat tax rate based on gross value. The ELF is a factor multiplied by the production tax rate, which decreases the percentage that the oil companies pay as production declines on a field. This was a sound concept in the early days of North Slope production, but in the current environment of high energy prices, the system is broken.
Second, we need to give credit for money spent on exploration and development wells, to encourage drilling activity. More wells producing means more oil flowing down the pipeline. We need to ensure that smaller independent oil companies are encouraged to continue doing business in Alaska by offering a reduced severance tax rate on small oil fields.
Third, we must include a progressive feature-when oil and gas prices are high, it makes sense that the State should see a greater return.
Fourth, a portion of the excess revenue earned during periods of high energy prices should benefit individual Alaskans through property tax or other relief. Alaskans should be able to share in the upside. We don't want to see all of the extra money spent on more government.
As our legislators travel to Juneau for the third time this year I encourage them to scrap Murkowski's PPT and consider a modification to the current tax system. This will allow them to make a decision more quickly with the comfort that we're still operating under a tested tax regime. This is the perfect opportunity for lawmakers to work together while representing the best interests of the State.
Alaskans demand a deal that protects their future. There is no need to settle for anything less.
About: John Binkley, republican
candidate for Governor, is a former co-chairman of the Senate
Finance Committee, former Chairman of the Alaska Railroad Corporation
and an Alaskan business owner.
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