The Anchorage Chamber of Commerce did something a little different at its Monday luncheon. It gave the stage to someone who does not support lowering oil and gas taxes, a position held by many pro-business chamber members.
Before the luncheon, Rep. Les Gara, D-Anchorage, joked that he was entering the lion’s den. And just after he took the podium, Gara immediately acknowledged that he was facing a crowd that was not necessarily friendly to his views.
“We all do this. We hang around with people who agree with us,” said Gara. “One of the hardest intellectual challenges is to recognize that the guy on the other side probably has some pretty decent points. It’s just easier to assume they don’t know what they’re talking about.”
Gara came armed with a facts and figures, crammed into a power point presentation.
He defended tax reform passed during the Palin administration, known as ACES -- Alaska’s Clear and Equitable Share.
Gara also criticized Governor Sean Parnell’s bill, HB 110, which would scale back some of the tax increases under ACES. Gara claims it will cost the state more than 8 billion dollars over five years.
“While other states have suffered from budget deficits,” said Gara, “We’ve built a 16 billion dollar savings account, not including the Permanent Fund. It’s why we’re not firing teachers. It’s why we’re not firing fire fighters.”
Alaska’s Revenue Commissioner, Bryan Butcher, was in Kodiak on Monday, pitching the governor’s bill to the chamber there.
Butcher agrees that HB 110 might initially cost the state income, but says the governor has different priorities.
“He’s interested in growing the private sector over the government sector, looking long term, not just the future for us, but our children and our grandchildren,” said Butcher. “This is more important than trying to squeeze every dollar out today, to the long term detriment of resource development for the future of Alaska.”
Essentially there are two incentive systems at odds: reducing taxes vs. offering tax breaks.
“If you invest, then you can buy down your tax rate,” says Gara. “We’re likely to have the most productive season on the North Slope in 20 years, because of ACES, because ACES says that if you invest in this state, you reduce your taxes.”
Opponents of ACES say that it hasn’t resulted in the kind of investment that will boost the flow of the TransAlaska Pipeline.
But Gara says tax breaks are a way to guarantee that producers will actually develop oil and gas -- that simply lowering taxes will allow them to take money out of the state.
He’s pushing for some new tax breaks -- one that would encourage the industry to develop heavy oil, and another that would give them credit for building new production facilities.
There was only one lawmaker in the room, Sen. Cathy Giessel, R-Anchorage -- and she was skeptical.
“This could be an exceedingly expensive money losing proposition, with all these credits,” said Giessel. “We have a lot of companies coming here to explore, but none of them have committed to producing what they find.”
Gara also spent considerable time during his chamber presentation doing what he called, “myth busting.” He argued that ACES hasn’t stifled investment or employment on the North Slope, and that North Dakota’s oil boom is not due more to changes in technology, rather than its tax structure.
One of Gara’s objections to reducing taxes, is, that the oil industry still won’t commit to more development.
Revenue Commissioner Bryan Butcher says Gara’s criticism is premature -- that HB 110 is yet to be heard in the Senate committees.
“I think we’ll see companies coming forward and being more specific,” said Butcher, who also says if HB 110 doesn’t work as intended, and spur the industry to produce more oil, then the measure could be revisited.
Former state senator Norm Rokeberg, who also sat in the Chamber audience, says he believes the Governor’s bill, which has already passed the House, is the best vehicle to boost production. But Rokeberg believes Gara may be right about creating tax breaks for heavy oil production.
“I think a lot of people appreciated his points of view. I think that’s the great thing about living in Alaska,” said Rokeberg. “We’re a relatively small group of people that’s willing to listen to all arguments before making our decisions.”