Stephen Moore: Saving Alaska from the biggest tax hike in state history

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By STEPHEN MOORE | HERITAGE FOUNDATION

Alaska is America’s Saudi Arabia when it comes to bountiful energy resources, but thanks to Biden’s anti- drilling and anti-mining policies, energy production in the state is way down. 

And because more than two-thirds of the state’s tax revenues come from the oil and gas industry, revenues are down and the state is facing an enormous budget deficit.  Now this red state is considering the worst possible fix: enacting one of the biggest tax increases ever seen in Juneau. 

Remember, this is a state that has been so overflowing with oil and gas revenues that each year it pays a “dividend” check of several thousand dollars to each Alaska resident.    

The tax increases under discussion include a new income tax, a new sales tax and a 40 percent rise in the fees charged to oil and gas producers. Somehow, the political class seems to think that Alaska can tax itself back to prosperity.  

An income tax would be a killer for Alaska, as it is one of nine states today that imposes no tax on personal income.  Adding one would shred one of its greatest economic advantages over other parts of the country. 

An equally bad idea would be to impose new steeper taxes on the energy industry.  Oil and gas producers are the state’s goose that lays the golden eggs.  Oil and gas production account for almost half of all state GDP and tens of thousands of high-paying jobs.  Moreover, the energy industry also foots most of the bill for the state’s 9% corporate tax.   

Introducing a new oil and gas tax would be like Nebraska putting a new tax on corn or Idaho trying to pay its bills with a special levy on potatoes. 

Some analysts say that the days of wine and roses in Alaska from the state’s oil and gas bonanza are long gone. Nonsense. Alaska has only skimmed the surface of its vast pools of energy. Oil drilling projects Willow and Pikka on the North Slope have bountiful resources and are critical for Alaska’s economy and America’s energy security. Half of the nation’s coal reserves are also way up north.  

Any new tax on energy production would only discourage more drilling and mining and thus dilute the reserves in the dividend fund. This means that if Alaskans want those dividend checks to keep arriving every year – and they’ve become a very politically popular fringe benefit in Alaska – the state needs pro-drilling policies not an agenda that chases the industry out of the state.  

Meanwhile, the fiscal problem in Alaska is on the spending side of the ledger. Amazingly, Alaska had the highest per capita state and local spending in 2020 at $17,374, followed by Wyoming ($15,641) and New York ($15,373).

You have to be a real champion big spender to take on more per capita expenditures than even New York. Alaska’s per capita local and state spending is twice as high as Florida‘s – and the services are no better in Anchorage than in Tampa. 

The solution to Alaska’s fiscal woes is a constitutional spending cap. Put state government on a diet.  HJR2 is a proposal that would limit government spending to a fixed percentage of Alaska’s private sector output. It would have to be approved by voters next November. 

The alternative for Governor Mike Dunleavy and most Republicans in the legislature is to raise taxes – which they campaigned against.  This would be a “read my lips”-style betrayal to the voters – aside from being harmful to the economy. 

The strategy needs to be to grow the private sector, encourage more oil and gas drilling, and shrink the burden of a state government that like the Energizer Bunny – keeps growing and growing.  

Stephen Moore is a senior fellow at the Heritage Foundation and an economist with Freedomworks. His latest book is: “Govzilla: How the Relentless Growth of Government Is Devouring Our Economy.”

20 COMMENTS

  1. HEADLINE!: Trans-Alaska-Pipeline System SHUT-DOWN, Abandonment of Project to begin immediately.
    IT COULD HAPPEN ANYTIME NOW1 The Globalists WILL TAKE OUR RESOURCES FOR THEIR OWN PURPOSES IF AND WHEN THEY TAKE CONTROL, and may ALREADY HAVE TAKEN CONTROL! (e.g.: Deb Halland, Mary Peltola, Lisa Murkowski, Alaska Senate Binding Caucas, and more). Why won’t Alaska Governance use VISION AND TENACITY to develop ALASKA Resources for ALASKANS PROSPERITY?

    NATIONAL SECURITY STARTS or ENDS HERE IN ALASKA!!!. ALASKA’S RESOURCES ARE VITAL, AND WE HAVE THE TECHNOLOGY AND EXPERIENCE, but will need Emergency Orders, War Powers Act, or the like to expedite the work and success over the next decades.
    1). New Refinery for Alaska Fuels – Build a new facility to refine Alaska’s Royalty Share Oil in Fairbanks;
    2). New Railroad extension from Fairbanks to Norton Peninsula to haul fuel and goods to the bush and back;
    3). New Deepwater Port on Norton Peninsula with new railroad extension for Pacific Rim export and trade;
    4). New Pipelines – Fairbanks to Anchorage for refined products; Gas Pipeline from North Slope to Fairbanks;
    5). Magnetic Levitation Train – Elevated Track from Fairbanks to Homer for high-speed interstate transport.

    It will take decades to get these projects completed, It’s a plan for our children’s future, we know how to build and do these things, and it will require many new Alaskans to complete this critical plan.
    NATIONAL SECURITY = ALASKAN PROSPERITY FOR ALASKANS, NOW and IN THE FUTURE!

    • I have been harping on building rail to the west coast of Alaska since 1979. The money was there but the will was not. The reason the gasoline refineries were shut down is because Seattle imported gas into the state just below what the refineries could sell it for and profit. As soon as they drove the refineries out of business, they sky rocketed gasoline prices. #5 is BS, forget it. So is #4, not economically viable. Deep Water port would be an overnight thing as soon as the railroad is completed. The rail ought to go to Red Dog first, with a spur to Ambler. That would pay for it in 7 years.

      • Slam-dunk on the RAIL EXTENSION to the west coast of Alaska for Alaskan’s needs right now; roads are tough to maintain, but AKDOT would like to build one there anyway. EPA and other Federal Regulations broke the economic backs of refineries in Alaska and Nationwide. As refineries became older, they could not be replaced with new facilities. With Washington State trends of “going green”, will those refineries be driven out of business too? Alaska will need to import fuel from elsewhere then, and struggle for supply on the world market during shortages. A PIPELINE along the Alaska Railroad Right of Way could safely deliver fuel from a NEW REFINERY IN FAIRBANKS to Anchorage users. A Magnetic Levitation Train is futuristic, but we did build a World Class 800 mile Trans Alaska Pipeline System successfully. Of most importance, is our Base Load Energy Demand need that can not be met by renewables-only, those sources will provide only a few percent of our needs. We have a front-row seat to the future here in Alaska, including WWIII if it comes forth.

  2. What part of ‘higher taxes = lower production’ don’t these ass clowns understand? If Alaska has less money coming in, we should be SPENDING less! It’s been proven time and again that if the state and feds get out of the private sector’s way (i.e., reduced taxes and regs), industries develop, generating more tax dollars. Remember Reagan’s tax reduction? That reduced tax rate immediately produced more tax dollars due to the immediate upturn in business.

    NO NEW TAXES!!!!!!!!!!

    • What amazes me, and it shouldn’t, is the rank stupidity of the legislature. Sitting in Juneau I get a front row seat to this. I’ve actually met several of them over the years and I’m constantly amazed they can walk and chew gum.

      Our cost of living is ridiculously high. It’s a large part of why our wages are what they are-necessary for survival.

      The theft of the PFD cuts into our ability to make annual large purchases to help offset this. A sales tax (the least offensive since everyone pays) will cut deeper. Throw in an income tax and a lot of people are gonna be stressed to the point of breaking.

      Add in Biden’s economy and a lot of people are gonna start looking at the door.

      It’s not a red or blue issue for most. It’s a green one. Do I have enough green to get by? More and more the answer is no.

      If the goal is outmigration, rewarding unions, and killing our economy, tax away. If the goal is to economically grow Alaska, it’s dead on the vine with this.

      Sadly, I expect some or all of this tax fever dream to pass. And the Cowardly Lion of Alaska to “stand tall” as he usually does. By folding.

  3. The issue isn’t a bloated state government near as much as the bloated state government that genuinely believes all the money in the state belongs to them. Regardless of the alleged party affiliation.

    The term is socialism, and we are a quasi socialist state. Headed to full on socialism.

    Don’t look for support from the empty suit governor. He wants sales taxes.

  4. If Juneau wants to empty the state of all the income producing people, enact these taxes. All that will be left are government employees and the welfare crowd.

  5. We can’t grow private enterprise. The fed controls most of our land and resources.

    The state wants taxes and is beholden to unions.

    In a strict sense, we are fascist. The “state”, both federal and local, own the land, pick and choose who lives and dies economically.

    More and more the only thing we really can control is how much longer people with common sense will tolerate living here.

  6. Stephen Moore makes several great points in his article. He stopped short by not citing Alaska’s failure, over the years, to diversify its economy. Here’s one example. In the late 1980’s, a large Finnish forest products company spent a great deal of time and money analyzing the forests and the tree growing conditions in southcentral Alaska. Their conclusion was that this part of Alaska was virtually identical to Finland regarding soil type and climate and that it would be possible to establish a vibrant long term forest products industry in southcentral Alaska. This Finnish company was ready to construct a large hardwood sawmill complex and establish tree nurseries in southcentral Alaska. This would have generated hundreds of well-paying jobs and a market for logs produced from several thousand acres of timber in the Susitna Basin, most of which is now dead or dying. Harvested acres would have been replanted. The governor and agency people ran the Finns off. Fun fact, there are more moose in Finland than there are in Alaska although Finland is twenty percent the size of Alaska. Obviously, Alaska is not Alabama or South Carolina; Mercedes or BMW are not going to build automobile assembly plants here but the economy of Alaska could darn sure be diversified using the state’s natural resources including its forest lands. In forestry, the existing timber is only the inventory; the land is the factory. The thinking that we have tourism and oil and that’s enough of an economic driver is clearly over. It’s time to think outside of the box we have put ourselves in.

    • Charles, Great comment! In addition to Forest Products we also missed the boat on developing infrastructure for the Mining Industry, things like roads and extending our Rail Road.

      I agree that Alaska should work towards a Forest Product industry. Sadly the Fed’s own most of the best Timber parcels, this means that their development is never going to happen so long as Environmental Org’s and their legions of Greenie Lawyers have paper upon which to write their lawsuits to stop logging!

      As for the Finn’s and the Swedes, I’ll agree that they do have much larger Moose populations than does Alaska. Sometime waaay back when, they also whacked all of their Wolves and Bears too, well, most of them at least. Funny how that works?

  7. stephen moore ad the laffler institue crowd need a new napkin. the 1980’s napkin trick never worked. bogus theory that 43 years later has destroyed america. voodoo economics like bush sr said.

    time to restore america by electing legislators at all levels of government. send politicans to prison for gutting the american dream for tht next generations. leave the instagram, twitter moments, soundbites where they belong, in the landfills of history.

    legislators need our help, politicans collect paychecks and retirements without correcting any of the issues and crises they create, no solutios from politicans just vauge solutions till the next news cycle

    • I don’t Understand… Great handle for an economic illiterate. I bet that there are other things you don’t understand also, things like Liberty, Freedom and certainly whether you are a boy or girl!

      Nice try with the commie left wing democrap talking points, oh, bonus point, if you are serious about “restoring America” or the American Dream then I ‘ll bet you will be the first to get rid of that crime syndicate Biden Family, right?

  8. No on increasing taxes on anything, especially the oil industry. Shut these socialists down. Simple, No on increasing taxes.

  9. Stephen Moore and the Heritage Foundation are bankrolled by billionaires, not average taxpayers. Heck, most if not all taker state Alaskans can’t even call themselves average taxpayers. How convenient Stephen forgets to mention how much $$$ Washington D.C., via cash rich blue states like California and New York, send to Alaska every year in Federal funds.

  10. This is all just a pipe dream with the pun intended. Combine the Globalists, climate change cult, their media, and there is little chance for any kind of pro business environment. These people honestly believe they will die in the next few years if our resource utilization is not completely shut down. Bad situation.

  11. A sales tax hits poor people the hardest — is a regressive tax: “People who earn less pay a larger percentage of their salary in the form of sales tax, as compared to those who earn more.”

    • I don’t care. Truly I don’t.

      People can moderate what they buy, and essentials are usually non taxable.

      Poor people need to have skin in the game too. Otherwise it’s just rank wealth distribution.

  12. If only Alaska had predated Norway and the North Sea. No need for “senior senators”. If the royalties had been banked rather than spent and continuing with income tax, Alaska would have been a banker to the Lower 48 , the world and controller of its destiny. Yes, less spent on non-returnable social spending early on. No Gucci glitz but more Alaskan as in the pre-pipeline days. Not a welfare state. Can we learn from this and make some improvements?

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