6-7-15 Oil Taxes Approach the Alaska Political Spotlight Again

Comment.  Readers can be sure that when Alaska's governor calls a summit on the state's fiscal situation, the outlook for oil and gas investors becomes less certain.  (See ADN story, column left)

This is because the natural course of politics is to tax entities with the most cash and fewest votes and protecting large voting blocks of beneficiaries.

For example, the capital intensive oil industry employs very few, highly skilled masters of technology to produce great wealth.  Other industries, like commercial fishing and tourism are people intensive; they employ huge armies of mostly lower skilled workers –voters– that produce insufficient tax revenue to fund the education, airports, social services, roads, docks and seasonal unemployment costs associated with their vocations.

So when the Revenue Commissioner talks about "changes" to an oil and gas tax regime that was reformed by the Legislature two years ago, then withstood a voters initiative to repeal the reform last year, investors must calculate a higher risk factor into their ongoing investment decisions — including big projects like gas pipelines.

The way it will likely happen is that politicians will say, "…the fiscal crisis affects everyone and everyone will have to contribute a 'fair share' to the solution." What follows will be fairly insignificant spending cuts and modest tax hikes affecting large groups and proposals for more significant tax increases affecting oil and gas investors.

If it rolls out any other way, it will be a first for Alaska.

Alaska's deplorable fiscal crisis is decades old and self imposed by politicians and greedy constituents; it was not caused state's small cadre of highly efficient wealth producers. 

Yet we can expect in coming months misleading and demonizing rhetoric aimed at those investors to justify taxing them more; the rhetoric will also serve to cover the derrieres of the real culprits — Alaska's current and past political bosses.  

-dh