Legislature guts Palin's oil tax bill

Senate and House committees nix net tax increase, but it's not the final word

Posted: Sunday, October 28, 2007

A state Senate and House committee separately put Gov. Sarah Palin on notice Saturday: no new taxes. The committees gutted her oil tax bill, stripping out the most divisive section, an increase on net profits taxes from 22.5 percent to 25 percent.

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This is not the final word. Two more committees each in the House and Senate will review the bill in this special legislative session that began Oct. 18 at Palin's behest and could last as many as 30 days.

The oil tax also has been at the heart of a federal corruption probe that started in Juneau with state lawmakers and has now stretched to Capitol Hill, where Sen. Ted Stevens and Rep. Don Young, both from Alaska, are under scrutiny.

Palin called state lawmakers back to work because she believes last year's oil tax law was tainted by the corruption charges that has former Rep. Vic Kohring currently on trial. She is also concerned about a projected $800 million shortfall.

Palin told The Associated Press on Saturday she thought the heavy edit to the bill called Alaska's Fair and Equitable Share - or ACES - was premature in the 10th day of the session. Still she's heartened by a pledge from lawmakers to keep the fiscal issues on the table for discussion.

"I'm disappointed in the chopping of this bill, but it's significant that the individual committee members make comments on this," Palin said. "The intent of ACES is to receive what had been projected and promised them last year in terms of revenue.

"So, if committee members don't want the 25 percent rate, that's what I want to hear. We need to know what we are working with and the public needs to know what the individual committee members believe about a rate that we believe provides that appropriate value."

The substitute bill from the Senate Resources Committee came first Saturday morning. It cut the original bill from 51 pages to 24 while removing the proposed tax rate and a progressivity provision that increases the tax rate as the price of oil rises.

Committee Chairman Sen. Charlie Huggins said he thought the fiscal terms should be left for the Senate Finance Committee. Huggins said the redacted sections aren't a statement, but simply a deferral to the upcoming committees.

"There are a lot of moving parts," Huggins said. "This technique is taking into account that we'd like to pass something in 30 days. It's probably politically popular to say 25 percent because that's the number floating around. We need to see the cause and effects of 25."

But committee member Sen. Tom Wagoner, R-Kenai, disagrees.

"To me this bill is like a lady going to the prom without a dress," Wagoner said. "We left the dress off it because the dress is the tax rate and the progressivity."

A few hours later, the House Oil and Gas Committee offered a version heartier than the Senate's - 33 pages - but it still strips out the tax rate. This committee's offering, however, provides a formula that earns more revenue as the market price for oil increases.

It enables the state to close any revenue shortfall without doing anything that may be perceived as punitive - such as a higher tax rate - said committee Chairman Rep. Kurt Olson, R-Soldotna.

"I think it's going to pick up support," Olson said. "I would like to think we haven't wasted a month and that we will come out with something reasonable when we're done."

Saturday's developments capped a round of hearings that featured some unexpected highlights throughout the week and a tone that could get increasingly tense:

• House Rep. Mike Doogan, D-Anchorage, coined an increasingly popular buzz word to describe the complexity of the issue - "bumfuzzled".

• North Slope producer Exxon Mobil Corp. stunned lawmakers by saying the current 22.5 percent tax rate should be lowered while others have fought to sustain the current rate.

• Wagoner and Sen. Bill Wielechowski, D-Anchorage, walked out of a hearing after Exxon Mobil refused to disclose profits in Alaska the way its peers BP PLC and ConocoPhillips have.

Some nerves already are frayed with nearly three weeks left in the session.

Earlier in the week, things got personal when Rep. Jay Ramras, R-Fairbanks, questioned the reason for the session and challenged Palin's grasp of her own bill.

"I know how we got pulled in here, but I don't understand what we are doing here," Ramras said. "When I was at the town hall meeting, the governor was adept at articulating how her luggage got lost from New York to Fairbanks. But she wasn't adept at articulating this new economic policy for Alaska. I don't get what we are doing here."

Palin said she won't engage in a battle of barbs.

"Human nature tempts one to want to shoot back, but we'll stay above that fray," Palin said Saturday.

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