It is déjà vu all over again. Big government advocates again are trying to hoodwink Alaskans into cutting off their noses to spite their faces.
This time around they are calling their ballot initiative the “Fair Share Act.” It should be called the “Alaska Goes Broke Act.” Last time, when they tied to repeal Senate Bill 21 in 2014, it was “Repeal the Giveaway,” which was laughable on its face.
Fair Share backers would have you believe that hiking per barrel production taxes on 90 percent of Alaska’s oil fields, its “legacy” fields, will be good for the state and pony up more than a billion dollars in new revenue.
The question: At what cost?
If you will recall, the Legislature in 2013 approved Senate Bill 21 – the More Alaska Production Act – to spur slumping North Slope oil production and generate new tax revenue. Then, about 90 cents of every dollar the state spent came from tax revenues. Nowadays, that has dropped to about 80 cents.
The law SB21 fixed, former Gov. Sarah Palin’s onerous Alaska’s Clear and Equitable Share oil tax, or ACES, was an investment killer, with a 25 percent base rate and progressivity contributing to a marginal tax rate of more than 90 percent at higher oil prices we likely will never see again.
It squeezed industry hard to pay for burgeoning government and fat capital budgets. In response, investment dollars for new oil production flew out of the state. Who could have seen that coming?
Under ACES, as U.S. oil production skyrocketed and, with the nation pumping more than 7.7 million barrels of oil daily for the first time since 1995, Alaska fell behind as investment and jobs went elsewhere. Production soared in places such as North Dakota and Texas, but declined in Alaska – trailing even California. Worse, throughput in the trans-Alaska oil pipeline was drying up at 6 percent to 8 percent a year.
ACES backers labeled SB21 a $2 billion “giveaway” and tried to get it killed at the polls, but failed.
They’re back. Now, even as the industry is making huge strides toward producing more oil on the North Slope, the Fair Share bunch is out to wring more money out of it for a state government that cannot control its spending. They say the industry is not paying enough; that it is getting a free ride. They say SB21 is a failure; that production is down, revenues to the state are down. They act as if they have not heard that oil prices have plunged or that new production on the North Slope is close to reality.
Despite their nonsense, the industry hands Alaska nearly $3 billion annually in production, corporate and property taxes.That does not even count royalty payments. That does not sound like a free ride.
If they are successful, the results will be entirely predictable. Jobs will go. Investment will go. The effects will ripple though our already-weak economy. Businesses that depend on the industry will go. Everything from housing to snowmachine sales will be affected. One need only look at Alaska’s fiscal picture under ACES.
It will be an entirely different state. We could, as we have mentioned before, call it Alaskalachia – an economically darker, colder Appalachia. Its motto: North to the Poorhouse.