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Northrim Bank launched the Alaskanomics blog to provide news, analysis and commentary on Alaska’s economy. With contributions from economists, business leaders, policy makers and everyday Alaskans, Alaskanomics aims to engage readers in an ongoing conversation about our economy, now and in the future.

« U.S. Crude Oil Reserves Increase 8.2%; Alaska's Reserves Up 1.7% in 2009 | Main | Alaska's Permanent Fund World's Tenth Largest Oil Fund; 18th Largest Overall »

Friday, December 17, 2010

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Gregg Erickson

Dickinson says we're wrongheaded to think of state oil taxes as part of the return the state gets for the severance and removal of its oil.

He couldn't be more wrong. Consider the state's taxes on natural gas. As Larry Persily correctly notes in recent essay on this site, Alaska gas needs to be "priced competitively, which will require a reasonable state tax structure." Contrary to Dickinson, the need is for a reasonable state "take," including the take from taxes.

What would a reasonable state take look like?

A reasonable structure would make the state's take (royalty and taxes combined) highly progressive to production profits, with no floor on the combined royalty and tax take. That way the state shoulders some of the risk of low prices that would otherwise be carried wholly by the producers. ACES, though only covering the tax portion, is a good model.

We should, as Dickinson says, be having" a debate about tax policy and how much economic activity has grown or been stifled from low taxes in certain industries and high taxes in others." But the economic effects of taxes and royalties are largely identical. Taking Dickinson's legalistic approach to pretend otherwise is no way to facilitate this conversation.

Gregg Erickson

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