Palin's tax plan makes a comeback

House Resources action reinstates 25 percent tax on net profits as bill moves on to finance committees

Posted: Tuesday, November 06, 2007

Gov. Sarah Palin's oil tax bill, gutted in two earlier committees, made a comeback and then some in two subsequent committees over the weekend.

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Late Sunday evening, the House Resources Committee, took a bill from which Palin's tax increase had earlier been stripped out and added it back.

A divided and sometimes emotional committee debated amendment after amendment to Palin's Alaska's Clear and Equitable Share proposal, and finally settled on a plan that would raise more money from oil production than the governor originally proposed.

The House Resources version reinstated Palin's 25 percent tax on the oil companies' net profits, along with a higher "windfall profits" rate that kicks in when oil prices are strong.

Rep. Anna Fairclough, R-Anchorage, lamented that the committee had "increased the burden on industry" and would wind up hurting the state.

Rep. David Guttenberg, D-Fairbanks, didn't think so. The oil industry, he said, makes "staggering billions of dollars in profits."

The committee's Republican members were split on the bill, but all the Democrats voted to support higher taxes, a pattern that became evident even before they began discussions on the amendment raising taxes.

"It is apparent that there is a group that has the votes to pass this," Fairclough said.

Notable about the tax raise was that it was proposed by Rep. Paul Seaton, R-Homer, and backed by Rep. Carl Gatto, R-Palmer, co-chairman of the Resources Committee.

The other co-chairman, Rep. Craig Johnson, R-Anchorage, led the fight against the tax raise. Johnson, from an oil industry-heavy district, said he feared the tax bill they were passing would devastate the state's economy, likening its probable effect to the devastation Hurricane Katrina brought to New Orleans.

"It will creep up on us ... but the devastation will be just as great," he said.

Gatto said he thought oil companies would continue to do well.

"The oil companies, bless their hearts, are going to do very well for their shareholders," he said.

A Department of Revenue analysis showed that plan would collect $1.3 billion more than the current Petroleum Profits Tax when oil is above $80 a barrel.

In the Senate on Saturday, the Judiciary Committee passed its own version of the ACES proposal, restoring the tax increase proposed by Palin that had been stripped out by an earlier committee, and adding more.

Judiciary Committee chairman, Sen. Hollis French, D-Anchorage, called his committee's bill "more muscular," both raising taxes and requiring more information be provided to the state.

A Department of Revenue analysis showed that, at a variety of oil prices, not only would the Judiciary Committee bill raise substantially more than Palin's original proposal, but it also would raise more than the House Resources Committee version.

That is done by both restoring the 25 percent tax on profits and upping the "windfall" provisions. It also has a new twist, becoming retroactive to Jan. 1 this year - and putting the additional taxes raised retroactively into the Constitutional Budget Reserve.

Sen. Lesil McGuire, R-Anchorage, called that part of the bill very important.

"My constituents have told me loud and clear that we must save more money. This provision saves every penny of this year's tax increase," McGuire said.

Palin later issued a statement praising the Judiciary Committee's action.

"I am particularly happy that the Senate Committee included the 25 percent tax rate to ensure that Alaska gets an equitable share of our resources and they further added language to reflect their commitment to save our surplus for the future," she said.

The Judiciary Committee bill also requires the oil companies to make public their profits in Alaska.

"Exxon's unwillingness to disclose their Alaskan profits is just not acceptable," Sen. Bill Wielechowski, D-Anchorage, said. "Under a net profit tax system, the public has to know what the big producers' net profits are. It's just common sense."

This week the Finance Committees in both the House and Senate are beginning work on each body's version of the bill, where many observers, and Finance Committee members, expect the main work in drafting the proposals to arrive on the floor of each chamber, to be done.

House Finance Committee Vice-Chairman Rep. Bill Stoltze, R-Chugiak, said members of the House Resources Committee sometimes appeared confused about what they were voting on, but the Finance Committee would make sure a good bill made it to the House floor.

"It's a more experienced committee," he said.

• Contact Pat Forgey at 586-4816 or patrick.forgey@juneauempire.com.



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