Alaska Journal of Commerce
Aug 10 – It’s a long road between here and new taxes, but Governor Mike Dunleavy’s administration has taken the first step to generate the new revenue that many in the legislature have said will go towards paying the “50-50” dividend plan required are released earlier this year.
Finance Commissioner Lucinda Mahoney presented members of the Legislature’s Joint Comprehensive Fiscal Plan Working Group with 10 conceptual options for oil tax changes and a proposal for a state sales tax that Dunleavy could support along with other ideas like legalized gambling or using the state’s forests to offset carbon programs to generate government revenue.
“We’re trying to present you with a wide variety of options and spending-related options so we can work together and come up with a financial plan,” Mahoney said during an August 5th meeting that continued on August 10th due to technical difficulties.
Mahoney said the government wants to “speed up” the typical timetable for all tax changes in order to generate as much revenue as possible in fiscal year 2022, which began July 1.
“That helps us balance the budget at first, but it also starts to build reserves,” she said.
The legislature will meet in Juneau on August 16 after the leaders of all four factions asked the governor for more time to work on long-term budgetary solutions. The session was initially due to begin on August 2nd.
At the top of the list of government revenue proposals is a reduction in the maximum tax credit per barrel that oil companies can claim from the current $ 8 per barrel to $ 5 per barrel.
A lowering of the high end of the sliding scale per barrel credit from $ 8 a barrel at average prices less than $ 80 to $ 5 at market prices less than $ 80 a barrel would occur in the next five Years bring in between approximately $ 165 million and $ 330 million per year in fiscal years according to sales calculations.
Many Democrats have long been pushing to get rid of credit per barrel altogether, effectively lowering base production tax by 35 percent at prices less than $ 150 a barrel, and Senate President Peter Micciche has recently been among Republicans who have voted for a change of the credit along with possibly a lowering of the base tax rate on production.
The government’s informal proposal would also include lowering the high-end price at which the loans expire from $ 150 to $ 120 a barrel.
Mahoney also devised scenarios for statewide sales taxes of 4 percent that could bring in anywhere from $ 600 million to nearly $ 1.3 billion a year, depending on the exceptions.
“We look at something wide and low with a few exceptions,” she said.
Mahoney said the tax officials also unofficially added $ 373 million to oil revenue prospects for the current fiscal year and $ 176 million to total projected revenue for the state for 2023, based on mid-July prices in oil futures markets, according to Mahoney.
The department now predicts that Alaska North Slope crude oil prices will average $ 72 a barrel in 2022 and $ 67 a barrel next year, compared to the spring forecast of $ 64 and $ 62 a barrel, respectively.
The new expected oil revenues mean the state would run into a short-term deficit of $ 800 million a year if lawmakers approve Dunleavy’s plan to draw half of the annual dividend drawing of over $ 3 billion from the Permanent Fund and using the other half for government services, a split first suggested by his 2018 election opponent Mark Begich.
Some lawmakers have challenged previous government revenue projections and statements that new taxes are not needed given the expected improvements in the state’s budgetary position, claiming that actual deficits are likely in the range of $ 1 billion a year or more with strong oil and financial resources currently in place, markets will decline.
It is also unclear how the tax concepts fit together with the governor’s proposal for a constitutional amendment that requires voter approval for all new state taxes.
Elwood Brehmer can be reached at [email protected]