Goodbye PFD, hello state income tax?

By Ray Metcalfe

If recently passed legislation to cut taxes on oil companies doing business in Alaska is not repealed by voters, you can say goodbye to annual Permanent Fund dividends and hello to a state income tax.
The money Senate Bill 21 gives back to BP, ConocoPhillips, and Exxon Mobil Corp. will leave Alaska with about the same amount of income from oil revenues that the state treasury had to spend back in 2002, when voters were choosing a new governor and the primary issue was discontinuation of dividends and resurrection of a state tax on income.
According to the U.S. Department of Energy, the average tax countries around the world charged for taking a barrel of oil is about 79 percent of the cash remaining for distribution between oil companies and governments — after all expenses of production and delivery for that barrel have been deducted from its sale proceeds and paid. By the Energy Department’s calculation, take-home profits for companies like BP, ConocoPhillips, and Exxon average about 21 percent of what’s left over after expenses.
In a speech to oil industry workers endorsing oil tax cuts, Alaska Gov. Sean Parnell said that the combine federal, state and local government tax burden on oil companies was 72 percent of the remaining distributable cash, prior to passage of SB 21.
What the governor didn’t say: Alaska’s take — including federal, state and local tax — was 7 percent below the international average. Parnell just said it was “too much.”
SB 21 will leave Alaska’s oil revenues somewhere between 20 percent and 25 percent below the international average and teetering on bankruptcy. SB 21 will give BP, ConocoPhillips, and Exxon close to 45 percent of the distributable cash remaining, after expenses, from Alaska’s oil production. That’s more than twice their expected international average.
Remember that year every Alaskan got a $3,269 dividend check? That happened because Gov. Sarah Palin put an extra $1 billion into the pot of money that’s distributed among Alaskans for PFD checks. In 2008, that meant every PFD-eligible Alaskan got a dividend of $2,069 plus a one-time “energy resource rebate” of $1,200.
Imagine if the $1.5 billion to $2 billion per year that SB 21 gives away to oil companies was instead delivered into the PFD pot. Each fall, Alaskans would get to look forward to dividends worth as much as $3,000-$5,000.
Unfortunately Parnell and the legislature chose to favor BP, ConocoPhillips and Exxon with billions in giveaways, leaving Alaskans to prepare for a day when the dividend checks no longer arrive. Oil companies will enjoy ever-larger profits off of your oil while your bottom line dwindles to pay for state government. 

Ray Metcalfe was in the Alaska State Legislature in the 1970s and 1980s and has been studying, writing and lecturing to educate Alaskans on international oil tax policies and the value of Alaska’s resources for over 25 years. He is now one of the hundreds of Alaskans working on the referendum to place the repeal of Senate Bill 21 on the 2014 August primary ballot. He can be reached at

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Posted by on May 22nd, 2013 and filed under Point of View. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

3 Responses for “Goodbye PFD, hello state income tax?”

  1. Earl Richards says:

    Parnell is not forcing the Big Three to spend their $1.5 billion per year tax giveaway in Alaska, so how is the giveway suppose to increase oil production and investment in Alaska, as per BS 21. This notion is an insult to the intelligence of the Alaskan people. The $1.5 billion should invested in the budget reserve and the PF and not wire-frauded to an offshore bank account in the Cayman Islands, by some Big Oil, executive “fat-cat.” The budget reserve and the PF should NOT be plundered by the oil-bought Parnell, his oil-corrupted legislature and ExxonMobil, BP and ConocoPhillips. Parnell has to be recalled, because he cannot be trusted to work for the Alaskan people.

  2. Goodbye PFD, hello state income tax? | Homer Tribune

  3. Dorothy says:

    We should probably say goodbye PFD and hello income tax anyway. Poor form to use it as a scare tactic, rather than a potential solution. While the giveaway will definitley accellerate the need for those measures, spending and unsustainable growth will be the real cripplers to Alaska’s economy in the long term.

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