I talked with Bengt, my ex-Alaskan friend in Minnesota, and he still thinks we should reinstate our state income tax. He has no sympathy for Alaskans. We pay no state income or sales tax and our state gasoline tax, at 8 cents per gallon, is the lowest in the U.S. In addition to paying no state taxes we expect the state to send money to anyone who has been here for a year.
"OK. So you're different, but Alaska, like other states, needs money to function," Bengt says. I agree. Alaska's budget is complex, but a few sources dominate the revenue stream.
One is the federal government. Alaskans receive more federal money, per capita, than any other state. Indeed, federal dollars constitute about 30 percent of the total Alaska state budget.
Income from the Permanent Fund is another big source; one year it was the biggest of all, but little goes to pay for government services.
The other big source is revenue from various taxes. Revenue from oil dominates and pays most of the state part of our budget.
Bengt has heard of, and is puzzled by, Senate Bill 21, our Legislature's effort to reduce revenue to Alaska from the oil industry. But the industry has promised nothing in return for the cut in their taxes.
Our present tax structure, ACES (Alaska's Clear and Equitable Share), was set up in 2007. It replaced the complex ELF (Economic Limiting Factor) and has worked well during the six years it has been in operation. Indeed, we Alaskans earned $20 billion more under ACES than we would have under the old ELF system. The taxes raised by ACES are in line with oil taxes worldwide and there is no good reason to change them.
I have heard and read thoughtful arguments, backed up by facts, against SB21 from several senators, both Democrat and Republican. There are no arguments, backed up by facts, for SB21; only fears, wishes and as one senator said, a "crap shoot!" Bengt says: This is awful!
Bengt asked, Why would anyone reduce taxes on the planet's wealthiest companies? He was also disturbed to learn that two of the senators that voted for the bill are actually employees of the oil industry. Since the bill passed in the senate by only one vote, those two votes were important.
I have written about Bengt before. He came to Alaska during the war with a PBY Squadron based at Adak in the Aleutians (see: "Those Navy Guys and their PBYS" by E.A. Freeman). He left Alaska just before our Legislature repealed our state income tax in 1980, and he considers that act to have been stupid. Over more than three decades, Alaskans have lost a huge amount of revenue from workers who live outside but fly in and out to work at Prudhoe Bay, and other parts of the oil patch.
Bengt said the Legislature got giddy after the Prudhoe Bay oil started to flow in the pipeline, and that giddiness gave us the income tax repeal. Now he thinks lawmakers have acted equally irresponsibly in trying to reduce revenue from our oil and that SB21 must be repealed.
The petition circulating now does not repeal SB21. It simply seeks to allow Alaskans to vote on it. I was surprised to see the irrational behavior of some who are trying to stop people from signing the petition; it sounds like Karl Rove's effort to suppress voting in the last national election.
There has been and will continue to be reduction in the rate of production (about 2 percent per year) due to gradual exhaustion of the massive world-class Prudhoe Bay field, not because of taxes. There is still a lot of oil exploration and development to be done in Alaska. This can be done in a way that provides maximum benefit from our resources for the people of Alaska, as required by the Alaska Constitution.
Vote Yes on the petition to put repeal of SB21 on a statewide ballot.
Carl Benson has been at the Geophysical Institute at the University of Alaska Fairbanks since 1960 and is professor emeritus of geology and geophysics at UAF.