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Oil tax rates: the strange case of Norway

Posted: May 15, 2013 - 12:07am

Two recent news items out of Norway caught my attention. The first happened April 30 when Governor Parnell went there to discuss tax policy. The second was the announcement on May 6 that Norway had decided to make a change to its oil tax laws.

Now, I don’t know whether the governor was responsible for the May 6th tax change. But I like to imagine that the Norwegians listened very carefully to the governor’s reasons for lowering taxes here. Being the sober and meticulous people they are, they ran a complex cost-benefit economic analysis on his ideas. They studied the results and then came to a reasoned decision. To raise taxes.

That’s right. Norway, whose current oil tax is higher than ACES, just raised its rate.

In 2011 Alaska’s Institute of the North arranged to lead a policy tour of Norway. For those of us who went it was a seven-day seminar in the ‘Norway Model’ which calls for a high tax rate on oil and a high rate of saving the resulting oil wealth. This system has also led to large investments in energy, mainly hydro projects, and in education; indeed, college is free in Norway. The public servants charged with making the model work all seemed like serious, thoughtful and businesslike individuals. I’ve described them as ‘hard-headed Norwegian patriots.’

Have I mentioned their permanent fund is almost twenty times bigger than ours?

Much of the Norwegian system would not be a good fit for Alaska, but the basic idea of using our oil revenues to build a stronger and more educated state should be the cornerstone of our tax policy. That’s how we fulfill our obligation to derive the maximum benefit from our commonly owned resources. Unfortunately, the passage of SB 21, the Governor’s bill to lower oil taxes, was a major setback in that effort.

Too much was given up in that bill in exchange for too little. Alaskans simply saw about $4.5 billion of money that would have been used to build roads and educate our children over the next 5 years given over to three of the richest corporations in the world. ExxonMobil, ConocoPhillips and BP all did very well this session. Education funding? Flat. Mental health programs? Cut.

It’s not as if the Governor’s office came out with new evidence to justify the reduction. During last year’s oil tax debate, the presentations from the governor’s advisors were so weak that one of his legislative allies called them a ‘train wreck.’ This year was no different, except in one very important way: gerrymandered election districts drawn by a Redistricting Board dominated by Republicans and ruled unconstitutional by our Supreme Court produced a state senate that passed SB 21 with no votes to spare, 11 in favor and 9 against.

I’m proud of the nine of us — seven Democrats and two Republicans — who stood firm. We proposed tax reductions that were tied to increases in production and investment, but those ideas were rejected.

The average Alaskan watching all this happen might be justified in feeling shortchanged by the system. Fortunately there is a cure for this politically induced nausea. It’s called a referendum.

Vic Fischer, who helped write our constitution, is spearheading the effort to overturn SB 21 with a vote of the people. The rules that govern referendums require three main sponsors, so he’s been joined by Bella Hammond, Jay Hammond’s widow, and Jim Whitaker, a former mayor of Fairbanks. This distinguished trio is acting how they should, as citizens of an owner state. I think they are hard-headed Alaskan patriots and I intend to help them.

This referendum will be unlike anything the state has ever seen. It’s a nearly perfect example of citizen power versus corporate power. Or to use the owner state model, it’s our board of directors versus theirs. The struggle to put a fair oil tax on the books and keep it there may all come down to how we answer one critical question: who owns Alaska?

Sen. Hollis French is a Democrat from Anchorage who represents District J.

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