Governor Sean Parnell yesterday, came out with a weekly message about the need for changes to the state’s oil tax policy. Parnell said that Legislators, experts, and an overwhelming majority of Alaskans understand the current tax system is broken due to progressivity.
Gov. Parnell: “They have studied, and they have seen that around the world, oil-producing jurisdictions are reaping the benefits of high oil prices and advanced technology. The same cannot be said for Alaska. Progressivity, the central part of Alaska’s current tax system, remains the single biggest roadblock to investment and new production in the State. Progressivity limits Alaska’s competitiveness especially at high oil prices, and the credits used to balance progressivity in the current system, they leave the State treasury at risk at low oil prices.”
Parnell noted that when oil prices fall, the risk to the people’s money in the treasury would be devastating.
Gov. Parnell: “In the next year alone, the State is on the hook for nearly one billion in tax credits, regardless of the price of oil. You know, hoping that oil prices remain high to avoid going in the fiscal hole is not a good strategy. We know that under progressivity, companies spend their time and resources calculating complex monthly tax rates, instead of making long-term development plans. With a tax rate that fluctuates monthly, and higher than other jurisdictions, it’s easy to see why companies are reluctant to spend billions of dollars on large scale projects.”
Parnell applauded the Senate Resources Committee and its Chair, Cathy Giessel, for their hard work and diligence on SB21, saying, their commitment to simplicity and the elimination of progressivity are substantial steps in creating a future for Alaskans.