House maneuver proposes no deductions on oil taxes
Despite being locked in a rhetorical battle over who can compromise more, House Democrats and Senate Republicans still can’t agree on what the state should offer in lieu of refundable oil tax credits.
The sides held an overall rather odd conference committee meeting on House Bill 111 Wednesday afternoon with Democrat members in Anchorage and Republicans teleconferencing from Juneau, where the Senate has reconvened.
A few dozen members of the Laborers’ Local 341 union rallied outside the Anchorage Legislative Information Office building before the meeting and crowded the meeting room to express their distaste for the House proposal to end carry forward annual loss deductions Jan. 1.
House Resource co-chairs and Anchorage Democrats Reps. Andy Josephson and Geran Tarr stressed that they do not want to do away with the carry forward, or net operating, loss deductions, but rather proposed to end them as a means to push the Republican Senate Majority to continue the oil tax debate next year.
“There’s no intent on our part to not allow the recovery of losses,” Tarr said.
What the House Majority does want, according to Tarr, is at a minimum to close the gap between the effective production tax rate, which is between 8 percent and 12 percent for producing companies at current prices, and the deduction rate the Senate has proposed, which is 35 percent.
Additionally, the Democrat-led House caucus wants more production tax reforms resulting in more tax revenue to help the state fill its $2.5 billion budget deficit.
The deduction rate proposed by the Senate matches the current 35 percent base tax rate, which is reduced by a sliding scale per barrel of production that increases as prices drop. The Democrats’ version of House Bill 111 passed during the regular session eliminated the sliding scale credits, and set the net tax rate at 25 percent with a matching 25 percent deduction.
“Our position is to have a serious discussion of the state’s tax structure,” Josephson said. “We’re willing to postpone that serious discussion until 2018.”
Putting a sunset on the ability for companies to carry forward their loss deductions would put pressure on getting that reform done, Josephson said, because nobody wants to see that provision gone for good.
In explaining the need for the pressure, he described the Legislature as “the people that shop for Christmas on Christmas Eve,” which is borne out in the fact that both sides have agreed on the need to end the state’s refundable tax credits since the first session started six months ago, yet it still hasn’t been done.
And even with the group of upset but quiet union workers attending, the contentiousness in the meeting was between the legislators.
At the outset Southeast Republican Sen. Bert Stedman questioned Tarr’s ability to hold the meeting given the House had not yet convened and resolved to take up HB 111 in the special session.
To that, the Democrats produced a memo from legislative attorney’s that ostensibly said it’s ok for the Legislature to break its own rules.
Stedman, who is rarely one to mince words, said, “one thing that’s certainly predictable is the unpredictability of the Legislature.”
And he insisted the most unpredictable thing legislators could do would be repealing the credits without a replacement — tax deductions that are a basic part of most any profits tax — on just the promise that something will be done later.
While Stedman has expressed his concerns over the sliding scale per barrel credit that reduces the tax rate as oil prices fall, he likened the proposal to “throwing industry into the freezer and shutting the door on them.”
Tarr indicated another meeting would likely be held Thursday, but most progress towards an agreement will probably happen in negotiations outside of the conference committee meetings; and this special session ends Saturday.
“I remain optimistic until there is no time left,” Tarr said.
Elwood Brehmer can be reached at email@example.com.