By DAN FAGAN
Credit freshman Republican State Sen. Rob Yundt on his ability to make a splash in the political world. Here’s what he posted about Must Read Alaska editor Suzanne Downing.
“Poor Suzanne, I’m afraid if brains were dynamite she wouldn’t have enough to blow a fart.”
Yundt is apparently angry with Downing for reporting on his proposed sizable tax increase on oil and gas company Hilcorp. Hilcorp is taxed differently than Exxon or Conoco Philips because it is an S corps company. Yundt calls the discrepancy crony capitalism. But the way the state taxes S corps has been in place long before Hilcorp invested in Alaska.
In 1980, Alaska ended income tax for individuals and privately owned S corps. Conoco Philips and Exxon are publicly traded unlike Hilcorp.
Yundt calls the S corps tax a loophole. But it isn’t a loophole. It’s the law and has been for 45-years.
When BP pulled out of the state choosing to invest in other parts of the world, no publicly traded companies showed interest in taking the oil giant’s place in Alaska.
But Hilcorp stepped up and made a $6 billion investment in Alaska. The company invested in Cook Inlet, Point Thompson, and even became the operating partner on the North Slope.
Unlike publicly traded companies like Conoco Philips or Exxon, Hilcorp couldn’t just sell stock to raise capital. It had to go out and borrow the money to invest in Alaska.
Hilcorp’s decision to do so no doubt made economic sense because of Alaska’s 35-year tax structure governing income of S corps.
At the time of the transition from BP to Hilcorp, critics were concerned the state would lose out on revenue. But the opposite happened. Hilcorp’s increased investment and resulting production meant extra state revenue, even more than had BP not left Alaska. That’s based on the state’s own forecast.
In fact ConocoPhilips and Exxon benefit from Hilcorp’s increased investment since the company is the operator on the North Slope. It means more oil down the pipeline which is a win, win, for the oil companies, the state, and the Alaska Permanent Fund.
Hilcorp’s increased investment has tripled production from 17,000 barrels a day to 50,000 in the past ten years at the North Slope’s Milne Point unit.
Hilcorp predicts it will increase North Slope production by 10% in the next five years if the tax structure remains steady.
Yundt’s tax raising bill will no doubt lead to a short term gain for an already morbidly obese Alaska state government. But it’s not a wise long term play.
Raising taxes on Hilcorp will force the company to pull back on investment in Alaska. It’s a perfect example of the fundamental economic principle: If you want less of something tax it more.
Yundt seemed to understand this during his campaign arguing on his website new taxes “stifle economic growth.”
“Alaska’s focus should be on reducing or at the very least capping state spending while at the same time nurturing economic expansion through responsible resource development, technological innovation & reducing the many bureaucratic hurdles slowing private enterprises.”
Yundt’s tax bill mirrors serial oil tax raiser Democrat Sen. Bill Wielechowski’s. It’s likely Wielechowski influenced Yundt to follow in his tax raising ways.
Sources say Yundt blindsided his fellow conservative minority senate caucus members with his tax raising bill and has badly damaged his credibility with them.
Will Yundt now leave the caucus and follow the path of Sen. Cathy Giessel and other Republicans and join with Democrats?
At least one House district Republican committee (District 28) that Yundt represents in the Senate has now passed a resolution calling for the senator to withdraw his tax raising bill.
Voters in Yundt’s mostly conservative district must wonder if he lied in his anti-tax campaign, or once he got to Juneau, he was fooled by the predominate capital city narrative that argues for transferring even more money out of an ever shrinking private sector into and ever growing state government.
Either way, Yundt will have to do some serious repair work with conservatives. Especially after his crude insult of one of our most formidable and admired heroes, Suzanne Downing.
Dan Fagan hosts a morning drive radio talk show weekdays on KVNT found at 1020AM 92.5FM and 104.5FM. The broadcast is also streamed on 1020KVNT.com.
Suzanne is brilliant! And her works speak volumes to her character. Must Read Alaska is the only news source in Alaska exposing the public sector unions and their hired guns. Yundt is among the dead, burying the dead. Jesus warned us about these men. Suzanne is brilliant.
We want to INCENTIVIZE business, not have them running away. Stop taxing us into oblivion! We want MORE production, not less.
What’s the point of having more oil if we are practically giving it away? You are a schill for the oil companies ripping off every Alaskan. Only stupid people believe that the oil companies are going to leave Alaska if they only make as much money per barrel here as they do elsewhere. It’s not a tax because it’s not their oil.
He must believe a bait and switch on conservatives is easier than disappointing the teachers’ union.
Yes the law is the law as written. So, since, what 1980 Hillcorp hasn’t paid any taxes for Alaska crude production, unlike the C Corps.
What Rob is wanting to do is level the playing field. As I see it and from what I understand in talking to Rob, this only impact oil patch S corps which is only, at this time Hillcorp. Much less and not talked about much, is they won’t pay taxes until after 500,000.