Alaska editorial: Big oil companies can't expect tax breaks when oil is worth $100 a barrel

Posted: Thursday, November 15, 2007

Oil at nearly $100 a barrel makes it difficult for oil companies to buck a tax increase for the industry.

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Gov. Sarah Palin called the state Legislature into a special session for a couple of reasons. The one in regard to changing the tax oil companies pay the state appears more likely to occur than when the session was called during the summer.

The Legislature in the final months of the Murkowski administration set a Petroleum Profits Tax at 22.5 percent. It taxed gross profits. Palin proposes a net profit tax of 25 percent.

While Murkowski's tax increased oil revenue to the state by about $800,000 annually, the state Department of Revenue claims a legislative version of Alaska's Clear and Equitable share proposal would generate $1.3 billion more, as long as the price per barrel remained above $80. That exceeds even Palin's version.

Increasing what oil companies pay is being done in other states with oil resources, as well as internationally. Alaska simply is following a trend.

Tax increases can discourage business, and some lawmakers ponder how changing the tax - the third time in three years - would affect Alaska's economy. That is a serious concern.

But as long as headlines herald that the oil companies are making huge profits, the price on a barrel of oil is at $100, and gasoline prices remain high at gas stations, the oil companies are bucking a headwind.

Airlines buck headwinds all the time, especially as their fuel expense increases, both in the sky and in their financial departments. Individual consumers experience them, too, in heating their homes and filling the gas tanks on motor vehicles. Prices are just too high - even for oil companies seeking lower taxes.

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