It's Not O.K. For Public Officials to Hurl Insults and Demonize CitizensCertain Legislators are complaining that oil companies are making so much money and investing so much in Alaska that citizens have no right to petition their government for more moderate taxes. Let's look into it.
According to the Alaska Department of Labor, the number of Alaskan unemployed claimants in the oil and gas support sector is dramatically increasing--after decreasing until 2006: 2003-2,229, 2004-1,198, 2005-914, 2006-773, 2007-997, 2008-1,356, 2009-2,205. Support industry jobs are like the canary in the coal mine; beware when they begin falling.
Meanwhile, as the oil sector responsible for over 85% of the state general fund decreases along with the annual 4-6% decline in Trans Alaska Pipeline throughput, state government jobs and the state budget continue to increase without restraint. This trend is unsustainable.
One cannot ignore Representative Gara's effort to demonize and insult our oil industry neighbors for making money at the same time that the state--without taking a risk or investing money--is marching away from the Prudhoe Bay wellhead with truckloads of largely unearned, million dollar bills (i.e. Royalties are 'earned' in the sense that companies agree following a bidding process to pay the state, as owner of the resource, for the right to develop that resource. An oil investor would always hope that the taxes--as opposed to royalties--would remain stable for the life of the investment but that has never happened in post-pipeline Alaska history):
We are mindful that while oil company profits logically increase as the price of oil increases:
- companies also pay more state and federal income taxes, and
- companies pay more royalty dollars to Juneau, @ 12.5% of the wellhead value, and
- Even under the old, flat 15% severance (production) tax, as prices increase, the state share increases in precise response (progressivity of the current production tax adds insult to injury).
Alaska's investment climate more closely resembles that of a third world country than that of a freedom loving country. A major reason for this is the amount of taxation and the unpredictable rate of increase of taxation. Add those factors--along with an unfriendly government--to our economic liabilities of remoteness from the markets, harsh and expensive operating conditions and high transportation and labor costs.
Perhaps one can appreciate, now, why insulting and demonizing the major economic investor in Alaska--who receives better treatment elsewhere in the world--is not O.K.: it is unfair, stupid and suicidal in an increasingly competitive world. One might also appreciate why lowering the cost of investing in Alaska by some reasonable amount might be in the long term best interest of those who hope to have long term investors employing them and their children while paying for their roads, schools, public safety, social programs, power cost equalization, permanent fund and helpful government bureaucracies.
The tens of thousands of Alliance-related employees--and the thousands more dependent on their success--are concerned about their jobs and about the withering Alaska economy. They are right to speak out. Furthermore, they HAVE a right to speak out.
Rep. Gara and any of his colleagues who are creating this cacophony of insults directed at the workers who give life to Alaska's economy and government, should be ashamed and should apologize.
Posted: February 4, 2010
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