The first changes have been made to Gov. Sean Parnell’s oil tax proposal.
The Senate resources committee offered their substitute on Friday, and it would bring the current base tax rate up from 25 to 35 percent. It also includes a $5 per barrel production tax credit and exempts 30 percent of new oil production from taxes. Like the governor’s bill, the committee substitute gets rid of progressivity, a mechanism that raises taxes when oil prices are high.
Sen. Peter Micciche, a Republican from Soldotna, explains that the goal of the substitute is to level out the government take at different oil prices. He says the substitute incorporates recommendations issued during earlier hearings of the governor’s bill.
“We heard complaints that the take was too high of a tax increase at the low end. We heard that people, including many senators, didn’t like the slightly regressive nature of the original SB21,” Micciche says.
The substitute also would give a tax break to Alaska manufacturers that make products that can be used for oil exploration, and it would also create a “Competitiveness Review Board” tasked with looking at how Alaska compares with other oil-producing provinces.
The Department of Revenue is still analyzing what effect the committee substitute would have on state coffers.
Both the Senate and House resources committees have multiple hearings on oil taxes scheduled this week. Ninety percent of the state’s revenue is tied to oil production.