A Few Details on New Tax Plans

Yesterday’s speech giving the closest thing yet to a preview of  the administration’s most recent thinking on oil taxes is online at the Fairbanks Chamber of Commerce website.  Deputy Revenue Commissioner Bruce Tangeman begins about fifteen minutes into the meeting.  What’s there is the game changer referred to in the previous post.

A couple of points lead to the conclusion that there has been an awakening in the governor’s office.

First,  near the start of the speech Tangeman says the administration recognizes that the new tax must be fair to Alaskans.  The focus for the past two years has been on what the oil companies want and this statement diverges from previous company policy.

The goal for the new plan is to balance the tax load.  Under the current tax regime, there are high credits for companies that spend money in exploration but high taxes for companies that actually produce oil from fields they have discovered.   Tangeman says that’s where change must focus.

“Credits, while valuable and useful, they need to be tied to production.”

Currently, the company tells the state it spent a dollar, and the state gives the company a partial refund. Tangeman says the state needs production, and the taxes should result in the company saying it invested a dollar in production – at which point the state gives the credit.  Yes, it will result in a lower tax rate,  but could finally increase the volume to offset a loss.

It’s an interesting speech with a lot of information in it.  Of course, it all needs to comes together in the actual legislation the governor will introduce.   Tangeman says the administration has hired new consultants – he didn’t identify them – and it is still “revamping” the plan.


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