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Alaska Considering Rollback of Oil Profits Tax

1 min readBy: Joseph Bishop-Henchman

In 2007, Alaska enacted an increase in the oil profits taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. dubbed Alaska’s Clear and Equitable Share (ACES). The tax is essentially a progressive taxA progressive tax is one where the average tax burden increases with income. High-income families pay a disproportionate share of the tax burden, while low- and middle-income taxpayers shoulder a relatively small tax burden. on oil companies: a 25% base rate (up from 22.5%), with the rate increasing on a sliding scale as the price of oil in excess of cost rises. ACES was pushed and signed into law by then-Governor Sarah Palin (R), who recently defended ACES in a statement.

Alaska Gov. Sean Parnell (R) and some legislators are now working to repeal the tax. Proponents of the repeal say it has greatly harmed the oil industry; opponents of repeal say that those claims are exaggerated. Officials estimate that repeal would reduce state revenues by $8 billion over five years. More:

The tax generated $6.8 billion in fiscal year 2008, a period marked by high oil prices and profits. It generated more than $3.1 billion in 2009, when West Coast oil prices averaged about $68 a barrel, and just under $3 billion in fiscal year 2010.

Parnell said the biggest complaint he heard from industry was about the progressive surcharge. Companies have said the surcharge eats too deeply into their profits, affecting future investment decisions in Alaska.

More on Alaska here.