The latest rewrite of a bill cutting taxes on oil companies is expected to bring down state revenue by more than $1 billion next year. That’s more than any version that’s been introduced so far.
The Senate Finance committee offered their adjustments to Gov. Sean Parnell’s oil tax bill on Tuesday, and the Department of Revenue weighed in on how it would affect the state’s treasury Wednesday morning.
Under current production forecasts, the new plan would cut taxes on oil companies by up to $1.3 billion dollars next year. The analysis goes out six years, and during that time, the total tax break would fall somewhere between $7 and $10 billion. For comparison, the governor’s bill is projected to cut taxes by $5 billion over that same period.
Sen. Lyman Hoffman, a Bethel Democrat who serves on the Finance committee, calls those numbers “truly staggering.”
“Too move this much cash across the table is going to have, in my view, detrimental effects to the state’s operating budget,” says Hoffman.
Representatives from the Department of Revenue say their analysis is preliminary and does not consider how the bill would change levels of oil production. Roger Marks, a tax consultant on contract with the legislature, projects that the finance committee bill would have a neutral effect on revenue if production increased by 70,000 barrels of oil per day over the forecast. If production were to exceed that amount, the bill would have a positive effect on revenue.
Right now, the state levies a variety of taxes on oil, including a profits tax that goes up with the price per barrel of oil. All versions of the oil tax bill that have been considered scrap that element of progressivity. The governor’s original proposal would just have oil taxed at a flat rate of 25 percent, while the finance rewrite ups the base tax by 30 percent with a $5 per barrel credit offset.
Joe Balash is a deputy commissioner with the Department of Natural Resources, and he says that the administration will be working with the finance committee to tighten the revenue projections.
“We’re anxious about that, but the Senate appears to be trying to find its own happy balance,” says Balash.
Balash adds that he’s happy to see that the Senate hasn’t reintroduced any sort of progressive mechanism to the bill.
The Senate finance committee will continue to review the bill this week.