ACES "severely limits" upside profit potential

Petroleum economics Roger Marks, in a September 1 article in the Oil & Gas Financial Journal, analyzes the progressivity element in Alaska's oil and gas production tax (ACES). Progressivity is not unique in taxation, but Alaska's form of progressivity is uniquely uncompetitive. In most jurisdictions, at lower income levels, there is a lower tax rate, and at higher income levels, a higher tax rate - the U.S. personal income tax is a progressive tax. Most progressive tax structures are bracketed, so the higher tax rate only applies to the dollars in that bracket. The ACES structure is not bracketed, so as prices and tax rates go up, the higher tax rate applies to every single dollar of income, which Marks concludes can "significantly suppress" the upside potential that drives industry investment around the world. Read the full article here.

Comments

[Joe Beedle]

ACES progressivity is too aggressive! This idea to bracket/bucket the increase Vs apply increase rate to all revenue is one step. Reducing the progressivity incline to a more reasonable level and dropping the base from 25% to 22% (as originally proposed by Palin) would also be more in line with other international tax regimes. Now that we got the windfall in our savings accounts (for those that needed to exact some revenge on the industry), let us return to something that will incent more production before we kill the goose! The independent's got what they needed to incent some exploration out of the bill (reasonable tax credits), but eventually they too will need relief from the high base and steep progressivity incline.