A Citizen’s Guide

Gov. Sarah Palin, in an op-ed piece that ran Sunday in the News-Miner, explained (again) the importance of reworking the state’s oil tax. Then she made what seemed like a direct request of state lawmakers with regard to how the tax rate varies with the price of oil.

“I chose to set the progressivity knob at a relatively low level in exchange for more security when prices are low,” she wrote. “We accomplished this through a gross tax floor at our legacy fields. If the Legislature chooses to discard that floor, then the knob on progressivity needs to be set higher — to make sure we capture a more equitable share when prices are high and profits are extraordinary.”

(Progressivity is the rate at which the tax rate increases when prices are high.)

On Saturday, the Senate Judiciary Committee rolled out a version of ACES that did just that. It took out Palin’s tax floor, but doubled the progressivity rate. On Sunday, House Resources also moved a version without a tax floor, but with higher progressivity.

Another interesting bit in Palin’s op-ed is a bit of math.

“The State of Alaska is currently the largest investor on the North Slope, having paid for 50 percent of all investments in 2007,” she wrote. “Yet our share of net revenue, including royalties, property and corporate income tax, was about 40 percent. The ‘equitable share’ component in ACES narrows this gap.”

The way I understand this, deductions and credits under PPT offset half the cost of investments, but the state only got 40 percent of the profits. It doesn’t mean the state is in the red, just that it’s not getting as much back on its investment as the oil companies are (it’s also not running treatment centers and drill rigs). As to whether that’s fair, or inevitable, that’s for lawmakers to decide.