With less than 24 hours of the legislative session to go, the House approved an overhaul of the state’s oil tax system, bringing down taxes on producers by hundreds of millions of dollars.
The vote came in the early morning, after a lengthy debate where supporters argued that the change was need to spur production and critics maintained that the change would wreak havoc on the state’s treasury.
The bill sets a tax ceiling of 35 percent on oil production, which is offset by a growing per barrel tax credit of up to $8 when oil prices are low. That credit disappears at prices of $150 per barrel or more. The bill also gets rid of a credit for capital expenditures, while putting in place incentives for new oil production. Most dramatically, the legislation scraps a mechanism known as “progressivity,” which increases the tax rate when oil profits are high. According to state projections, the changes would result in revenue loss of at least a $3.5 billion over the next five years.
Anchorage Republican Mia Costello supported the bill, and she argued that getting rid of the windfall profits tax would encourage companies to drill for more oil.
“Progressivity is our enemy,” said Costello. “Progressivity is what is robbing our future of the ability to pay for schools, and roads, and troopers.”
But Democrats refuted that, crediting progressivity with bringing record revenues to the state and padding the government’s savings accounts. Rep. Les Gara, of Anchorage, also expressed concern that lowering taxes wouldn’t stem off a long-running production decline, especially without any sort of guarantee from oil companies.
“Just doing something isn’t smart when the thing that you’re about to do is something that’s not likely to work,” said Gara.
The House passed the bill 27 to 12, with Bush Democrats who caucus with the majority joining the minority Democrats to oppose the bill. Three coastal Republicans initially voted against the oil tax bill, but changed their vote on reconsideration. They were Alan Austerman of Kodiak, Cathy Muñoz of Juneau, and Paul Seaton of Homer.
Gov. Sean Parnell issued an approving statement after the vote, saying that the bill “offers a future of opportunity and economic growth for all Alaskans.” Lowering taxes on oil companies has been a major priority for Parnell, but he had previously been stymied by a bipartisan coalition in the Senate. That coalition fell apart last year, after a number of members lost their seats in the wake of redistricting.
The bill is being returned to the Senate for concurrence. They narrowly passed a different version of the bill last month.