I spent most of yesterday trying to write a foolproof essay explaining why I planned to vote Yes on Ballot Measure 1 and why everyone who cares about Alaska should, too. I thought it was pretty clear that Parnell had traded tax revenues for jobs, and that claims of increasing production enough to make up for the lower tax rate were unrealistic. I thought the direct interest of the oil companies and support industries – the truckers and pipefitters and pilots – had created a lopsided debate between a vocal minority who depend directly on a lively North Slope and a quieter majority of Alaskans who depend on the state’s financial health, but less directly. I thought if you found the necessary facts and considered the relevant arguments, there would be a right answer.
Then, as I wrote and read, I realized how much I still didn’t know. I was in Juneau covering politics when Parnell offered his first two tax proposals, but I wasn’t there for SB 21. I didn’t know the revenue projections, or the increase in production needed for the state to break even. I didn’t know the relative importance of oilfield jobs compared to all the teachers, firemen, and biologists the state employs. I read ads claiming oil production is no longer dropping, and that revenues are as high as they would have been under ACES. I learned that sharp people whose commitment to Alaska I never questioned were voting no.
I had thought the right question to ask was Which tax policy will bring the greatest revenue to the state in the long run? with some consideration given to the economic value of a busy oilfield and to legitimate political differences favoring private industry or government spending. But now I wasn’t sure I knew the answer, or even if the question could be answered. And if it couldn’t be, then on what basis should one cast a vote? It’s our oil?
I think a thorough approach to figuring out which tax is best for Alaska would include a solid understanding of ACES, SB 21, and the interplay of taxes and credits in each; Department of Revenue modeling combined with unbiased expert analysis; an understanding of tax systems, government take, and geologic and political risk in other oil-producing regions; expert projections for oil prices and production costs; and an understanding of Alaska’s oilfields (composition, decline rates) and where they fit in the portfolios of the big three oil companies and of the smaller companies new to Alaska. I doubt if many Alaskans will cast truly informed votes tomorrow, and I’m not sure many lawmakers did when they voted on SB 21. For Alaska’s future?
I know Palin and Parnell's tax plans both include various tax credits, and that Palin's credits did more to force companies to reinvest in Alaska. I know Parnell's tax generates relatively more revenue at low oil prices and Palin's at high prices. I know production costs are an important wildcard, and that high costs reduce the difference between the two taxes. But there's much more I don't know.
Today I thought maybe people would vote based on whom they trust – a business group or union, a political party – and that maybe that’s not a bad thing. That maybe this vote is largely symbolic, not about tax rates and credits but about the state’s relationship to the oil industry. Palin stood up to the oil companies, on the gasline and on taxes. She argued – correctly, in my opinion – that the interests of the oil companies were not the same as those of the state, and she instituted policies that aimed to be enticing to companies but which put Alaska’s interests first. It’s remarkable to me that Parnell and many others seem to think what’s good for Exxon, BP and Conoco is good for Alaska, and, beyond that, trust the companies to tell us what they need. Palin had smart, honest people in her Revenue Department, and she brought in experts who were professional and inspired confidence. Parnell, at least in his first two tries, offered sound bites. I remember being shocked at how little homework he seemed to have done in setting tax policy worth billions. It was as if the companies had told him taxes were too high and he had taken their word for it.
Whether the numbers work out this way or not, tomorrow’s vote seems to be between those who believe private industry does and should drive the state and those who want to get the most from a limited resource. Between those who won’t lose sleep if oilfield jobs come at the expense of state budgets and those already suffering from budget cuts.
In a sense, a No vote would say Alaskans trust the industry enough to negotiate a tax plan together – in my opinion, to let the industry tell us what’s right for them and for Alaska. A Yes vote will send the message that Alaskans take the industry seriously, and value it, but won’t be bullied by it.
And I think that matters. This might sound conspiratorial, but I imagine oil companies don't base their investment decisions strictly on net present value – or rather, that they're fully aware of a tax policy’s potential to change. I wouldn’t be surprised if companies here delayed projects when Parnell took office, or when he declared the taxes too high – if lease requirements are as lax as they seem, why wouldn’t they wait? I wouldn’t be surprised if they fast-tracked projects when lawmakers passed a tax policy they liked. And I won’t be surprised if they punish Alaska for passing Ballot Measure 1. Alaska might lose money. Who really knows? But in the long run, I think it’s important to show that Alaska can and will look out for itself.
Before the Legislature passed SB 21, even supporters of ACES thought it needed some changes, and from what I’ve read, it probably does. I’m voting Yes for Palin’s tax, but also for the way she put Alaska first and took tax policy as seriously as it deserves.