Mike Dingman: Oil taxes shouldn't be decided by popular vote

By MIKE DINGMANDecember 3, 2013 

Next summer Alaskans will get to weigh in on how the state should tax its oil revenue. Very few of those darkening their circle either yes or no for Ballot Measure 1 will be an expert in oil taxes or production, however they will all have an equal say on Alaska's future.

Sean Parnell brought forward this tax reform. It started out as HB 110, morphed into SB 21 and became law of the land, goes into effect the first of the year. The new law changes the base oil tax rate to 35 percent and creates generous tax credits for the oil industry.

A referendum to repeal the oil tax cut will be on the state primary ballot in August. Critics claim that these cuts could cost the state up to 3 billion dollars a year in revenue. They claim that decreasing taxes on oil revenue has never increased investment in the future and that there is no proof that it will happen now.

Supporters of the new law point to increased investment on the North Slope since the law passed as an early indicator that it is working. The "Vote No On 1" group that was formed to oppose the repeal of the law says that the oil tax cuts are needed to keep the industry competitive with increasing competition and to create more jobs for Alaskan communities.

The state gets 90 percent of its general fund money from oil tax revenue. The state is tied to the oil industry in the same way that human beings are attached to their lungs - and the supporters and opponents are attached to their position on oil taxes in very much the same manner.

I am an anomaly in this debate; I don't fall on either side. I think that the oil companies would have been satisfied with the state fixing what is known as "progressivity," increasing rates at higher prices.

Debating the merits of this oil tax increase, however, is fairly pointless. People are fairly set in their opinion and the initiative to repeal it will matter less about the arguments made on both sides, but more on the ability of either side to get their supporters out to the primary ballot - one that has a historically low turnout.

That's not how a state should decide its future.

The referendum is a good process for many things. It is a check on government overreach and helps a community keep their leaders from being corrupted.

It shouldn't be used for complex measures such as oil tax structures.

Alaska is at a crossroads; we are headed into very dangerous territory. Daily throughput in the Alyeska pipeline has dropped below 550,000 barrels of oil a day and many experts claim that the point where the throughput is no longer enough to remain sustainable is right around the corner.

Nobody disputes that throughput into the pipeline is dropping; just as nobody disputes that the new oil tax law is going to take money out of the state coffers. The question is how we go about changing those two things.

The Legislature has spent a lot of money educating lawmakers and staff on the details of oil tax structure, ACES (Alaska's former oil tax structure) and the manner in which oil revenue correlates to state income and the state budget.

After all of that we are going to decide this - one of our most important issues through the ballot box, by a well-meaning, intelligent citizenry that is not educated enough on the issue of oil taxes to be making such an important decision.

As I said, I'm not a fan of the new oil tax structure - I think it takes less in revenue for Alaska than it should. Regardless of how much conservatives hate it when people say it, it is Alaska's oil, and we do have an obligation to ensure that Alaska is taking a reasonable share of those profits to fund state government.

However, this isn't the way to fix that.

Flashy web sites and witty commercials will win the day over statistical data, economic indicators and in the end, a vote by a very small percentage of registered voters in the state.

Who would you prefer to make this decision about Alaska's future?

Mike Dingman is a fifth-generation Alaskan born and raised in Anchorage. He is a former UAA student body president and has studied, worked and volunteered in Alaska politics since the late 90s.

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