My Turn: Vote 'yes' and history is doomed to repeat

Sometimes politicians get it wrong. And sometimes history repeats itself.


In 1990, President George H. W. Bush and a Democratic Congress imposed a 10 percent luxury tax on yachts, saying it would generate $31 million in new revenue annually.

Democrat leaders in Congress cheered that, finally, the ultra-rich would pay their fair share of taxes. It’s always convenient when there’s a villain to tag with a tax.

Within eight months after the tax law took effect, the largest U.S. yacht manufacturer laid off 1,140 of its 1,400 workers. In the first year of the tax, one-third of U.S. boat-building companies ceased production and the industry shed 7,600 jobs.

Yachts continued to be built — mostly in Europe and Asia — and very rich people continued buying them. But sales of new boats in the U.S. dropped dramatically.

Congress repealed the tax in 1993. By then, some 25,000 workers had lost their jobs and 75,000 more jobs were lost in companies that supplied yacht parts and materials.

Unemployment checks and lost income tax revenues cost the government $24.2 million. The value of jobs and salaries lost in just the first six months of the luxury tax was estimated at $159.6 million.

Fast forward to Alaska, 2007.

During Governor Sarah Palin’s first year in office, the “villains” were the oil companies, so she pushed to raise certain tax rates, enacting Alaska’s Clear and Equitable Share (ACES). Palin partnered with 24 Democrats and 16 Republicans who voted in favor of ACES while 17 Republicans and one Democrat voted against it.

Under ACES, from 2007 until 2014, North Slope oil production declined by an average of 6 percent every year.

ACES proved to be the largest oil tax increase in Alaska’s history.

In an effort to reverse declining oil flows and generate more production and more jobs for Alaskans, the Legislature reformed the tax by passing Senate Bill 21 in 2013.

The goal of SB21 was to create an investment climate to make Alaska more competitive with other oil-producing states and countries, and to get the Trans-Alaska Pipeline ready for larger volumes, possibly offshore or, maybe, if Republicans make serious political gains, ANWR.

Meanwhile, oil companies have announced plans for six new drilling rigs and $10 billion more in investments. Announcing and planning these investments doesn’t guarantee they’ll all happen. Companies have to cancel projects all the time for various reasons, and a very compelling one could involve yet another tax increase.

Oil industry critics mounted a referendum to repeal SB21. Their battle cry? “It’s our oil!” But populist rhetoric fails to explain who is going to get that oil out of the ground and transport it, or who is going to foot the bill for the permits, the hundred-million-dollar drilling rigs and all the associated costs involved in getting value out of “our” oil.

Rhetoric also fails to explain why so many environmentalists — who are against Alaskan oil production in the first place — are so strongly in favor of repeal. Does anyone really believe that global warming activists want to raise oil taxes as a way to get more oil flowing?

Of course boats and barrels of oil are very different products from very different industries. What’s the same, however, are the misguided motivations to single out industries for punitive taxes.

When you tax something too much you always end up getting less of it. It happened with the boat building industry in the ‘90s and recently with Alaska’s oil industry.

Sarah Palin’s signature legislation had seven years to put more oil in the pipeline. We wish it had worked, but it failed. The massive flood of investment that came after SB21 proves it is working. Leave it alone. Vote NO on Ballot Measure #1.

• Paulette Simpson is a Douglas resident.


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