Before we let our Governor or Legislature charge us one dime in tax, take away the Permanent Fund Dividend or cut the budget, we need to tell them to completely rid our tax laws of all the unconstitutional oil tax credits/payments that are made to private companies to subsidize private profits. I’m speaking of all the oil exploration credits, $5/$8 per barrel credits and tax exemptions included in SB21.
Article 9, section 6 of our Constitution states, “No tax shall be levied, or appropriation of public money made, or public property transferred, nor shall the public credit be used, except for a public purpose.” Yet our Governor and Legislature continue to fund this unconstitutional private corporate purpose. Our Constitution requires our resources be used for public purposes such as public safety, roads, education, and public health and not to pay welfare to a private oil company to subsidize its profits.
In addition to violating our Constitution, the tax credit system corrupts the public process in two primary ways. First, it keeps the beneficiaries of the payments secret because the credits are deemed to be confidential tax information. Secondly, it helps hide the credit program from budget cuts because the revenue the Legislature budgets to spend has already been reduced by all of the oil credits. Under the normal budgetary process of open government, when Alaska decides to build a public road, school, dock or a ferry, the contract is open to the public and each individual project is openly discussed. A bill is passed, signed by the Governor, and contracted to an open bidder. We know who and how much is being paid. We can exclude contractors who have shady records. The project is owned by Alaskans and is designed to serve a public purpose. Alaskans can directly verify that the project exists. Under the tax credit system, we don’t know who was paid, how much they were paid or even if anything was ever built or accomplished. It is illegal for anyone to speak of the details of any of the expenditures reimbursed to the oil companies by the State because the credits and payments are issued using the Department of Revenue’s confidentiality rules self-imposed by the Legislature. The Legislature has essentially criminalized open government. This is bad public policy and bad governance. All Alaskans have the right to know who is spending our money, how much is spent and what public purpose was accomplished. Our Legislature keeps the oil industry’s information secret to our detriment. Perhaps only the few connected legislative leaders and their top political contributors know the details of this information. An ordinary Alaskan’s only source of the credit payouts so far has been oil company bankruptcy filings.
It is long past the time to completely end the unconstitutional oil tax credit program just as the legislature did for the film credit program. Once the entire oil industry written tax credit program is removed from our tax laws, we will be able to plan for a future based on real economics instead of subsidies and slogans. If a Legislator can show economically how any of these former credit amounts would serve a public purpose in Alaska in can be addressed in the budget. This will allow for vetting and prioritizing of projects just as we do for every other expenditure for public purpose.
The successful private oil industry exists because prudent people using the best information available decided to drill a well after assessing that the reward will be greater than the risk. Today new unsubsidized wells are being drilled around the world despite the low prices, so why would we set up a credit program that incentivizes drilling only uneconomic wells which drain our oil and cash reserves in the process? If our Governor and Legislature honored our Constitution, this would not be an issue.
Wayne Blank is a certified public accountant who has been practicing in Alaska for 38 years. He lives in Anchorage.