October 29, 2007 - 8:06am | Lysander_Spooner

Ramras, slimy? No!

Par for the course with that guy.

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  October 29, 2007 - 6:04am | Stags_Leap

the other option

is to leave the current PPT as-is, aside from closing loopholes allowing deductions for maintenance costs -due to negligence.

If people remember the facts, the current PPT is NOT something Big Oil wanted. The rate that was passed was much higher than Big Oil and Bill Allen wanted. That "tainted with corruption" crap may get you a photo opportunity, but it is really meaningless in this particular case.

Learn from Alberta's mistakes, and put that rhetoric aside.

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  October 29, 2007 - 8:43am | truthseeker

Funny stags...............

how you never address the subject people are writing about, but just go back to your palin bashing/oil company sucking routine. Sdog raised a very legitimate point on progressivity. If nothing else the legislature should do this.

At $70 to $90/bbl the oil company profits are obscene. How much greed is enough for you?

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  October 29, 2007 - 8:00am | iHEARTmea

"Tainted with corruption crap"

What rock have you been living under, Stags?

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  October 29, 2007 - 8:08am | Lysander_Spooner

Hey, iHEART ...

... don't waste your time responding to that one. He's a hopelessly -- and cluelessly -- lost cause.

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  October 28, 2007 - 11:34pm | leowassilie

Simplicity

One thing that could be done would to have 2 basic models, each representing the hybrid.

There would be 2 calculations. One simple, based on oil value at the date the oil leaves Valdez, or even based on the average price of oil for that month, to smooth out calculations into 12 instead of 365. I think this is how the royalty works already, but you could add the same percentage to that as a loyalty take (tax w.e.) of 20%. The loyalty take would be solely dedicated to the Constitutional Budget Reserve, as the royaly goes to a few different funds. This is where Alaska gets its fair share. It is OUR take. They money is put into the CBR which demands strict budget control due to the accessibility requirement of 3/4.

The second part would be PPT. The credit for exploration is allowed there. The tax rate would have to actually be lower than it currently is, because the first part taken is based on the value of the oil at the time is leaves Alaska. Let them have their precious 20%. Of course, all dedicated to the General Fund.

The second part is based on the profit we share in because it's our oil, their investment. This is where the industry gets their credit for investing in Alaska.

I don't know, seems kinda simple.

Economics:

Let's say a country like Iran has nuclear energy. They use it for energy, because they sit on some of the largest supplies of oil. Instead of using carbon for energy, they use nuclear reactors. The two sides to it are this:
1. Nuclear reactors can spin weapons grade.
2. Nuclear reactors allow carbon to be sold on the world market to much more thirsty countries that rely on a inefficient consumption based economy.

I wonder what worries GW more, potential weapons grade or Iran getting richer? We know what side he spins publicly. Kinda like Iraq rhetoric. No body needs weapons grade though, and the region sure doen't like current US unilateral policy.

Iran already has partners in the deal too with Russia and China wanting every last drop. They know the economic issues, and that's why they won't support the US in the unilateral sanctions going in place.

Alaska has been giving away this valuable reserve for decades at dirt prices through dirt politicans. Alaska should always have had the value added component as a requirement for the economic plan for our energy. It belongs to the state.

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  October 28, 2007 - 9:17pm | sgitrak

Amen Sdog.....

I haven't read one post from anyone espousing this theory of Alaska's fair share to what that might be.

Seems to me, when times are good our fair share is more. When times are bad our fair share is less. That appears to be exactly what the changes to ACES does by jacking up the progressivity.

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  October 28, 2007 - 7:40pm | gilld

akallegro

...are you talking about Rep. Doogan's 10-point list of things one "has to believe" to support a net profits tax? The one he sent to his constituents on Oct. 26?

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  October 28, 2007 - 8:39pm | akallegro

I believe

thats the one, do you have it?

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  October 28, 2007 - 8:47pm | gilld

"Red Queen" Email

(Mike Doogan, email to constitutents, Oct. 26, 2007):

"To support a net profits tax, the current PPT or the governor’s ACES proposal, you have to believe that:

1. State tax policy should be designed to give the oil companies more money, and the state treasury less, because the companies will reinvest that revenue in Alaska.

- Well, no. Last year, the oil companies spent $1.7 billion exploring and developing oil in Alaska, according to figures I’ve received from the state Department of Revenue. They shipped at least $6 billion in profits out of the state. That means that for every $1 our tax law allows a company to keep, it will invest 28 cents or less.

2. Reinvestment will result in more money to the state at some point than we let the companies keep.

- We don’t know that, for two reasons.

- First, there’s risk. Some oil industry activity, like exploration, is very risky. A dry hole doesn’t get you anything. And in the time between the investment and the time more oil is pumped, the price could drop enough that the state gets less value than it would have gotten by taking the money in the first place.

- Second, a dollar is worth more today than it is tomorrow. If you give a company $10 today, and it gives you back $11 five years later, you lose.

3. If it doesn’t, the economic benefits to Alaskans will make up the difference.

- We don’t know that, either. There’s no doubt that if the companies invest more, there will be more economic activity. But, there’s no telling who benefits. For example, there’s a lot of talk about creating jobs for Alaskans. Given the oil companies’ crumby record on Alaska hire, we’re more likely to be creating jobs for Texans.

4. You know how each of the oil companies operating in Alaska makes its investment decisions.

- Nope, sorry. PPT and ACES imagine a world in which all decisions are the result of economic models. But for all we know, the decisions are made by guys wearing beer-can hats and throwing darts at a map. Actually, the truth probably lies somewhere between those theories. Where, exactly? We don’t know.

5. Our tax policy is a deciding factor in that decision-making process.

- This is just plain wrong. The single most important factor in oil industry decision making is how likely an investment is to produce more oil that’s worth more than it takes to produce. In fact, this is so important it trumps everything else. Companies will invest in places where the government takes 90 cents of every $1 if the “rocks” are good.

- The second-most important factor is how much that oil is worth. At today’s prices, almost anything short of drilling on the moon makes sense. The third, surprisingly, is whether your company has the people to do the job.

- Is our tax policy the fourth-most important factor? I don’t really know, and the people who do aren’t saying.

6. Those decision-making procedures are congruent enough that you can manipulate all of them with a single tax law.

- A dozen investment committees in a dozen different places, working for a dozen different companies with different goals, all make the same decisions based on what is, at best, the fourth-most important factor in their decision. Good luck.

7. You can write a tax law that will do that.

- Again, good luck. All we know for sure about the most recent attempt to do that, the PPT, is that it’s bringing in quite a bit less revenue than the state expected. Is it stimulating investment? Check back in a few years. Is that investment resulting in more oil production? Check back a few years after that. In plain words, both the PPT and ACES are a seven-year leap of faith.

8. Your tax policy is so good that it will run by itself for some period of time.

- That’s what all this talk about “tax stability” is. You have to like your law a lot to say we’ll just let it run until 2011 before we re-evaluate it. Why? Because by 2011, we’ll be pumping about 25 percent less oil. And if our tax policy was wrong, that oil’s gone. There’s no way to try to capture more of its value.

9. If your tax policy doesn’t do what you expected it to do, it’s not the tax policy’s fault.

- That’s what people are saying now. The PPT brought in $800 million less than we expected? That’s not a problem with the law. Costs were higher. Well, if the law didn’t work in the real world, it’s not a good law, is it?

10. If your tax policy results in the companies keeping more money than you wanted them to, you can claw that money back.

- History doesn’t support this idea at all. The state and the oil companies disagreed on royalty rates and, years later, the state settled the cases for pennies on the dollar. Same thing happened on the severance tax and the corporate income tax. And we’re disputing pipeline tariffs with the industry all the time. What makes anyone think this is going to be any different?

So to believe in a net tax, you have to be like the Red Queen in Through the Looking Glass, who could believe six impossible things before breakfast. Except you’ve gotta believe in 10."

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  October 28, 2007 - 9:32pm | akallegro

Thanks x10 gilld

At least we have one rep that can see past the pablum of percents and face the facts.

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  October 28, 2007 - 10:04pm | truthseeker

Oh no!!!!!!!!!!!!!!!!!!!!!

don't tell me we elected a legislator that has both brains and a sense of humor. Must make you proud to be a democrat ehhhh Stags.

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  October 28, 2007 - 10:04pm | truthseeker

Oh no!!!!!!!!!!!!!!!!!!!!!

don't tell me we elected a legislator that has both brains and a sense of humor. Must make you proud to be a democrat ehhhh Stags.

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  October 28, 2007 - 7:57am | pp05416

Howse about putting

OUR money into OUR pockets? In the corporate neocon industrial world this is called a DIVIDEND.

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  October 28, 2007 - 8:16am | wasilla_blogzilla

I second the motion pp.

While your rantings generally have a liberal bias (I learnt that from Sean Hannity!) Our business partners, Big Oil, neglected to reinvest the windfall of this year into our state. Instead they go to Russia, Indonesia, South America, and the "Stan" countries and use our oil wealth to bribe locally corrupt leaders. You talk about level playing fields in those countries. HAH! Instead, keep all that dough in Alaska. Like George Bush says, "I want you to be able to choose how to spend YOUR money." Now If I got my share, I'd be puttin' an addition on my double-wide, I've promised my wife and maybe get that new Polaris six-wheeler I've been wanting for some time. No one has dared to look into how all this local money would help our economy by making new jobs, etc. Instead our "rank and file" (GWB again) legislators know only of one income source for their elections, again...you guessed it...Big Oil. It's time we made them diversify their appetites for income. I'm tired of hearing Big Oil squeal like little unweaned pigs in a poke.

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  October 28, 2007 - 8:34am | pp05416

See Blogzilla

This is one idea, if properly promoted, that will cross the entire political spectrum. The leggies have tried unsuccessfully to stifle referendum. But if they fail us again miserably we CAN overrule them at the polls. George Bush was elected in 2000 partly because he promised Americans a $300 child tax rebate. Wow, imagine if that number were 10 times that amount. Who you gonna vote for now? It'll take an expensively intense fear mongering campaign to turn that around WazzyB. Let's take the money while we can.

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  October 27, 2007 - 7:33pm | akallegro

there was discusion

albeit short about that in Senate resource. I believe it was Wielechowski that made note of the fact that the Legislature can and has taken lumps of cash and put it into the Perm Fund. Thus preserving state windfalls for future needs.

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  October 27, 2007 - 9:05pm | sgitrak

Deposits into the Perm fund is a bad idea.......

the perm fund is already $40 billion and doing fine.

What they need to do is start paying back the CBR they owe about $5 billion.

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  October 28, 2007 - 4:46pm | akallegro

no argument from me

about building the CBR back up and sending billion dollar chunks to TRS & PRS.

I just don't want to see all this work on ACES to get eaten up on growing more government.

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  October 27, 2007 - 7:15pm | Stags_Leap

what it will be used for

obviously, to cover short-falls from the deep economic recession that will certainly result from the ineptness of the Palin administration.

They can't explain anything. You will get bashed for even asking a question. This is entirely political posturing for Palin's sake. Yet another photo opportunity for the dim-witted one.

This IS A TAX. Don't let them fool you with that 6th grade rhetoric. It's of no value to us if chase off future development due to excessive tax and spend policies by the Palin Administration. I guess the Chinese may be interested.

How goes the AGIA bidding process???? This foolish hybrid PPT proposal of Palin's will fail...and we still won't have a viable gasline contract from her serious flawed AGIA. Wake up Alaska! Demand accountability...and more than juvenile rhetoric from the Palin Posse. I seriously hope you morons don't get paid for posting your pro-Palin propaganda on the Blogs.

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  October 29, 2007 - 10:20am | rfn

And please, all you anti-Stags:

STOP confusing "Democrats" with Socialists. The Socialists are far less dangerous.

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  October 29, 2007 - 10:28am | Black3

The socialists know they're socialists,

have some intellectual underpinnings, and are capable of rational thought. The Democrats are into feelings, emotional responses, and pandering.

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  October 29, 2007 - 8:19pm | gilld

Ha!

rfn and Black3.

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  October 29, 2007 - 6:06am | Stags_Leap

More Palin Propaganda Below

those are some seriously brown noses down there.

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  October 27, 2007 - 7:17pm | Lysander_Spooner

Seriously, Stags ...

... you really should get some new material.

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  October 28, 2007 - 6:13am | yours_truly

Stags is at least half right

And folks are starting to become aware of the damage Palin will do to our economy. This is not anti-Palin ravings either....this is serious.

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  October 27, 2007 - 7:23pm | Stumpy1

Agree, Lysander...

Stags just keeps flailing away with the same old rhetoric. I wonder if Mark Begich agrees with even half of Stags angry posts...

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  October 27, 2007 - 7:36pm | gilld

We Do

Stagger Lee, we do get paid for posting as the Palin Posse. Quite generously, and quite surreptitiously, of course, with payments delivered in the dead of night from black helicopters.

No, really: we do.

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  October 27, 2007 - 7:37pm | Lysander_Spooner

In fact ...

... this has a lot to do with why we need to raise oil taxes.

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  October 27, 2007 - 7:43pm | Stumpy1

What do we do with the loot?

Good question, Mr. Black.

There is a staggering amount of money at stake. Each Alaskan is selling about $35,000 dollars worth of their crude oil to Big Oil, per year, at current prices.

Of course many in the legislature believe it is OK for Big Oil to take a much bigger portion of revenues from the sale of that oil than the citizens of the state- (AKA the owners).

It is, after all, our oil.

Assuming we can reform the methodology that ensures that we receive a fair and reasonable return for the sale of our oil, we should be having a serious discussion about how that new revenue is spent.

Nobody is discussing this aspect in a substantive way- and this is an incredibly disappointing lack of leadership.

So where should the money be spent?

1. First, we have to begin paying our bills. The Democrats gave us a ten billion dollar PERS/TRS deficit. We could raise an extra billion dollars a year and it would take us ten years to just climb our of the hole if we allocated 100% of the revenue to just this one problem.

The defined benefit system was a disaster- the full implications of which we have not felt.

2. We have tremendous capital infrastructure needs. Just to be ready to build the gas pipeline we will have to spend about one billion dollars to get the roads and bridges ready for what will be the largest construction project in the USA.

3. To grow Alaska's economy we have to realize that Alaska's road system must not look like the USA did in 1825. Imagine what the USA would be like today if there was no way to drive from the East Coast to the West Coast.

That is where Alaska is today. There are vast regions of our state that are inaccessible by road.

We can not even drive to the state capitol.

How frigging stupid are we?

For tourism and mining industries to be able to grow, and help us diversify our economy away from oil, we must invest in our capital infrastructure. It is of paramount importance.

We have the most expensive state government in the country, spending $15,000 per person- with a great deal of those expenditures made on idiotic welfare programs. This spending is NOT sustainable in the long run.

We need a visionary plan to invest our new wealth in our infrastructure. Everything from new roads, to geothermal development and laying a fiber optic backbone so that Alaska can join the 21st century.

Again, great question, Mr. Black. It is a question all of our state leaders should be considering.

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  October 29, 2007 - 10:02am | chrisosowski

Invest in Infrastructure? Outstanding Idea!

Finally someone else speaking about infrastructure. Unfortunately, with the Federal Government locking up all of our economic opportunities to generate the vast amounts of funding required for such undertaking, and our meek and mild population being so accepting of those from the lower 48 gaining such popularity by branding our projects with names like "bridges to nowhere", it'll never happen anyway. The only way I see is if we could get some really competent representation in Washington who could really deliver and bring home some bacon. That's right, Ted and Don and Lisa arent even coming close. I wonder how much the cost of the interstate highway system was to cover and cross an equivilent amount of acreage as we have here in alaska? Then adjust it for inflation to get the true cost in todays dollar? Without ANWR, Tongas logging, and so on, Alaska will never be able to afford such a thing, and we might as well admit that we're pretty much as close to entering the 21st centure with respect to our ability to deliver quality health care and education opportunities to our rural areas as we'll ever be. Welfare state? We were better off as a Territory when we truly were "wards" of the Federal Government!

But you are so right, this reality dose while sobering, in no way justified the squandering of whatever income or wealth we derive from the few sources left to us by a Federal Government and opinionated general population and news media in the lower 48 who seem intent on "mothering" us to death.

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  October 28, 2007 - 7:48am | akwillis

Mr. Cremo and Mr. Hammond had the right idea........

Remember prior to 1979 when we paid income tax? Then we decided to create a permanent fund that would eventually generate sufficient revenue to eliminate the need for an income tax? As the fund return became large enough to actually pay for state government, Dr. Cremo proposed a further enhancement. His plan would raise revenue by bond sales for the first year of state spending and thereafter restrict state expenditures to whatever the permanent fund had (emphasis on "had") earned in the prior year. Payment for the "seed" bonds would have to be included in each years' budget. Governnor Hammond introduced the concept of disbursing oil revenue directly to the citizens and then forcing the government to "claw back" the funds it needed from the citizenry in the form of a tax on dividend disbursement.
Why not do both. Start the "Cremo Plan" which would limit state spending to only cash available. Also, include a PFD if the citizenry demanded from their government that spending be restricted to allow money for a PFD.

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  October 28, 2007 - 11:04am | Stumpy1

The Permanent Fund and state spending

It is hard to believe that it has been almost 30 years since the Permanent Fund was created...

The Permanent Fund is an example of what can happen when we have competent, honest, leaders engaging in strategic decision making.

What Hammond did not anticipate is just how much the legislature and his successors would increase state spending. The PF could not come close to paying for the cost of state government today. The fund would have to have closer to 400 billion- or be ten times its present size- to be able to thrown off enough revenue to pay the per capita cost of Alaska state government- of about $15,000.

Just to pay off existing liabilities would take about 30% of the corpus of the PF.

We need to fundamentally reform what programs we fund, and reorganize state government to get better efficiencies and significant cost reductions for services provided.

Would people pay attention if we obtained a fair share of the value of the sale of our oil, gave it directly to the people, and then forced the state to tax the money back?

You bet.

Here's how much the PF contains as of Oct 25, 2007:

Unaudited, as of Oct 25, 2007

US Bonds $9,482,300,000
Non-US Bonds $1,212,000,000
US Stocks $11,321,400,000
Non-US Stocks $5,603,200,000
Global Stocks $6,011,200,000
Real Estate $3,815,100,000
Alternative $2,065,300,000
Alaska CDs $198,900,000

TOTAL $39,709,400,000

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  October 28, 2007 - 11:48am | akwillis

Thanks for the information.

Well, maybe the Cremo plan revenues should still be the spending target anyway since Permanent fund income is the only hedge against personal consumption, property or income taxation if resource extraction taxes cannot keep up.
I had mentioned earlier in another conversation that perhaps the Alaskan dream has changed and now it is to have one spouse work for the state and the other work for local or the federal government. I do wonder what the ultimate motive for this disproportionate goverment expansion has been. Is it simply re-distribution of wealth in the form of employment?
In the mean time at least we should seriously disscuss the Hamond "Claw Back" program even if it just a line annotation on the PFD check to start. Something like "This is your Gross dividend_____, this is what the state took back_____, and this is what you have left____.

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  October 28, 2007 - 12:26pm | Stumpy1

Redistribution of wealth

Willis, you've asked a great question: "I do wonder what the ultimate motive for this disproportionate government expansion has been."

You may be be giving far more credit to past elected officials than they are due. Your question implies that there was an overall plan.

I doubt that there was. During session, our legislators are all nicely ensconced in Juneau, mostly only hearing form state bureaucrats and lobbyists. The message they hear on a continuous basis? Spend, spend, spend. Please spend money on my_________ program/project/bureaucracy

At the end of the day a given legislator feels pretty good about himself. He has given away money that is not his, and been told how wonderful he was for doing so.

I'll add one more idea: In addition to a note, like you suggest, on the dividend check stub, I would do this:

Send one notice to every Alaskan, once a year- maybe within the PF dividend check envelope- to save the postage- with a notice that says: The state government received $________ last year from the sale of your oil. Your per capita share was $________. We spent it all. So you will get nothing, except this measly dividend. Have a nice day.

Do you think that might wake some people up?

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  October 28, 2007 - 12:31pm | AK_Lady

Gimme, gimme, gimme!

The entitlement mentality in this state is astounding.

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  October 29, 2007 - 8:17am | tim2

Entitlement mentality

Wow, for some one in Alaska to even bring up the entitlement card and not is mention the PFD check is astounding! It is ok to get a PFD check each year but not ok for the State of Ak to ask for a better return on the oil pump during the time of high oil prices? Many posts mention that the State doesn't know what they will do with the extra money and that is reason not to support a increase tax rate. Wow again! How can someone accept a PFD check and not consider it an entitlement? Alaska has become a welfare State, very low to no tax's, free money each year, the PFD has created a whole class of free loaders.

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  October 28, 2007 - 6:04pm | akwillis

Gimme,gimme, gimme indeed.....

Depending on how far to the right on the political spectrum you find yourself, you might have said "The entitlement mentality OF this state is astounding" .
The Alaska Constitution contains what must have been considered some very progessive ideas for the mid 1950s'. These include "development,...of all natural resources belonging to the State... for the maximum benefit of its people" and,"The legislature shall by general law establish and maintain a system of public schools open to all children of the State", and even "Criminal administration shall be based upon... the principle of reformation". The question is how do conform to just these consititutional mandates and not commit fiscal suicide. Hiring the entire state to work on endless public work programs won't work. Leaving the decision to the intellectually and ethically challanged does not appear to be working. I like the idea of starting with the simple concept of not spending more than you earn. Also, let the citizens get a real feeling for what they are paying for by "clawing back" some of the revenue from them. Just an idea.

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