As a people, we have a choice before us on August 19th that will forge the path we wish to walk down for the next generation of Alaskans. It is not about the oil companies, and it is not about the politicians. It is about what type of economic future we wish to see for Alaska.
Many factors go in to decisions to invest money into a business venture. The cost of doing business, including labor, supplies and transportation. Access to capital. Potential revenue streams. How much do you assume you can sell your product for, and how many can you sell.
And then there is the one factor that business has no control over – taxes.
The faction of the community that would have you believe that the old tax structure in Alaska – ACES – was average compared to other jurisdictions around the globe seem to forget about the other factors that go into the business investment decisions. Is oil in North Dakota, California, Texas and Oklahoma as costly to get to as Alaskan oil? Do they have a drilling season that is only a few months long? Do they have to ship their oil down an aging 800 mile long pipeline?
They seem to forget that the Alaskan economy is far more dependent on oil than any of other jurisdictions in North America. Oil accounts for more than 90 percent of the state’s general fund revenues, and for a third of the entire economy. The federal government (mostly military) accounts for a third, and EVERYTHING else accounts for the last third. That means that mining, commercial fishing, sport fishing, forestry, and tourism combined do not have the same economic impact in Alaska as oil.
For the first time in 12 years, the North Slope production decline has been essentially erased as new investment and activity on the North Slope has increased sharply since the new tax structure was passed by the legislature last year. If the new tax structure is repealed and oil production resumes the accelerated six percent decline that occurred under ACES, which of our industries will be able to step up and fill the gap?
Tourism has still not completely recovered from the series of taxes imposed by a 2006 initiative. Commodity prices for minerals are not doing well and it would take an exponential increase in mining activity to fill the hole left if oil continues to decline.
Perhaps the fishing industry could pay a royalty for catching our fish. How about if one fish in eight belonged to the government, the same as the royalty on oil where at least one barrel in eight goes to the state? Royalties are only part of the equation, there are taxes, too. Under the old tax structure, the total government take (federal, state, local taxes/royalties combined) was 71 to 75 percent at $100 a barrel. Today it’s 61-65 percent under the new structure. What do you think a similar total government take would do to a fisher’s permit prices and investment in processing facilities? None of these are good ideas, but if we follow the lead of the initiative sponsors, they are logical outcomes – after all, it’s our gold, our copper and our fish, right?
The reality is that nothing will be able to fill the economic hole that will be created if the amount of oil shipped down the pipeline plummets, and the only thing we as Alaskans have control over that impacts production are our tax and regulatory policies.
We can choose to raise taxes and take 100 percent of the last barrel, and then choose what kind of state in which we want to live. It will be far different than the one we live in now.
Or we can choose to think about the long term and try and get more oil into the pipeline. We can try and help develop a natural gas pipeline to heat our homes, generate revenue and stabilize our economy. It is our choice. Ballot measure 1 is a short sighted vision that will leave us with a broken tax policy and a dismal future.
Please join me in rejecting this viewpoint. Alaskans can have a prosperous economic future, but we must make wise decisions. The wise decision on August 19th is to vote NO on ballot measure 1.
Ralph Samuels is a life-long Alaskan and serves as Vice President, Government and Community Relations, for Holland America Line. The opinions expressed here are of his own.
Return to newsletter headlines
