Newly minted Sen. Rob Yundt of Wasilla surprised his fellow Republicans when he submitted his first bill, and it was a tax increase.
The Yundt tax, Senate Bill 92, is designed to enact a specific 9.2% tax on Hilcorp, the company that runs Prudhoe Bay, having taken over for BP Alaska when it exited the state.
Hilcorp is an S corporation, and currently those are not taxed in Alaska. But the bill opens up the door to taxing all S corporations, large and small, and business owners will want to pay heed.
Yundt’s bill threatens to destabilize the oil industry in Alaska. Many conservatives are “livid,” according to Must Read Alaska sources, that Yundt effectively sandbagged his Republican colleagues by not having a conversation with them first. But Democrat Sen. Bill Wielechowski was pleased, saying that good ideas can come from all sides. Wielechowski has been trying to increase taxes on oil companies his entire career. He’s known in circles as “Bill Will Tax.”
SB 92 is similar to a bill offered in 2023, SB 114, which was act “establishing an income tax on certain entities producing or transporting oil or gas in the state; relating to the oil and gas production tax.”
Yundt’s bill has nearly the same language as Wielechowski’s : “An Act establishing an income tax on certain entities producing or transporting oil or gas in the state.”
The tax is supposed to close what some say is a loophole. The S-Corp tax category bypasses income taxes on the company, enabling tax liability to “pass through” and apply to earnings of the company’s shareholders.
In 1980 Alaska repealed its personal income tax, so the shareholders in Alaska do not pay an income tax on their gains.
The statement from the Senate Republican Caucus said the Republican minority was measured, but pointed: They said they are “a non-binding caucus, meaning our members are free to pursue policy proposals that align with their constituent goals and personal values. While Senator Yundt is a valued and respected member of our team, the entirety of the caucus does not align with the proposed legislation SB 92.”
In the House, the Republicans were equally surprised as the Republican minority in the Senate. No one was brought into the discussion before Yundt introduced the bill on Monday.
Although the House and Senate are controlled by pro-tax Democrats, Yundt will still have to appear in front of the respective Resource committees and testify, and he may not be able to answer detailed questions about his own legislation. Oil and gas tax is an extremely specialized and complicated subject that takes years to master.
Some in Juneau have suggested that Yundt is being used by Democrats to find a way to fund their big-spending items, such as returning massive pensions to state and city employees in Alaska through the defined benefits package, and enacting a major spending increase for Alaska’s woefully mismanaged schools. If the tax increase is tied to either of these spending programs, it may improve its chance of passing.
In the past, Gov. Mike Dunleavy has threatened to veto similar legislation.
Who put Yundt up to it as a freshman legislator who has only been in office for less than a month and who never mentioned oil taxes during his campaign against Sen. David Wilson? That’s the burning question among Republicans in the Capitol this week.
