Corruption probe boosts tax support

Governor, GOP legislators join in oil revenue fight

Posted: Wednesday, November 07, 2007

While Republicans are divided over whether the state should raise oil taxes, lately, it's appeared that GOP legislators backing the Republican governor have the upper hand.

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Gov. Sarah Palin called a special session to reconsider the state's oil tax over the objections of the oil industry and its allies in the Alaska Legislature. Palin wants to increase the tax on oil company profits from 22.5 percent to 25 percent.

An ongoing federal investigation into corruption, which has resulted in convictions of several Alaska lawmakers, may be helping the governor shore up support for a more stringent tax.

Rep. Carl Gatto, R-Palmer, who has proved in this special session to be a key supporter of Palin's efforts to get more oil money for the state, said the ongoing corruption trials showed that the state didn't get a fair deal when the Petroleum Profits Tax was adopted last year.

It should have adopted the 25 percent tax rate Palin is proposing now, he said.

"I think we were cheated," he said. "Heck, I know we were cheated. I read the papers."

Last week, former state Rep. Vic Kohring, R-Wasilla, was convicted in federal court on multiple corruption counts having to do with bribes taken to pass last year's Petroleum Profits Tax.

Some legislators who have backed Gov. Sarah Palin's call for a new session and a new look at oil taxes cite the corruption investigations as well.

"There was a corrosive cloud over the last proceedings because of these charges," said Rep. Mike Kelly, R-Fairbanks, and a member of the powerful House Finance Committee.

Opponents of the tax increase, including oil companies, various chambers of commerce, oil industry contractors and some legislators, have argued that those so far convicted played no significant role in adopting the Petroleum Profits Tax that Palin has called "tainted."

Kelly, at a press conference Monday, listed some of those against whom allegations have been made, by position, to show their importance: A Senate president, a former House speaker, a Rules Committee chairman, an Oil and Gas Committee chairman, an influential Finance Committee member, he said.

Kelly's references appear to be to former Reps. Pete Kott, R-Eagle River, and Vic Kohring, R-Wasilla, both convicted on corruption charges; former Rep. Bruce Weyhrauch, R-Juneau, indicted and awaiting trial; and former Senate President Ben Stevens, R-Anchorage, and current Senate Rules Committee Chairman John Cowdery, both named in the corruption trials but not indicted.

Cowdery and Stevens have denied any wrongdoing; Weyhrauch pleaded not guilty.

"There was a cloud," agreed Rep. Bill Stoltze, R-Chugiak. Stoltze is vice-chairman of the House Finance Committee, and spoke with Kelly at the House Majority's weekly press conference. "It didn't touch everybody, but it touched key people."

Sen. Kim Elton, D-Juneau, said this was a good time to fix what's wrong with the oil tax system, possibly the best chance in years to get Alaska's fair share.

"We now have a perfect storm of different events, record oil company profits, convictions of legislators who were involved in the last debate and extremely high oil prices," he said.

Elton said the last time the state passed an oil tax bill, on the Economic Limit Factor, was in 1989. This year, the ongoing corruption trials may provide the same impetus the Exxon Valdez spill did that year, Elton said.

"At the last major tax revision, the ELF, it was one event that got us a new tax," he said.

The corruption revelations were a key part of Palin's decision to take a fresh look at oil taxes just a year into her term, said Commissioner of Revenue Pat Galvin, the administration's point person on the issue.

Kohring's conviction last week didn't make an obvious shift in the Legislature, he said.

"I didn't notice any change in mood or momentum from the conviction," he said. "I think it had already been factored in."

• Contact Pat Forgey at 586-4816 or

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