This Red State Could Tax Away Its Prosperity


Alaska has abundant energy resources and is America’s Saudi Arabia. However, due to Biden’s antidrilling, anti-mining policy, the energy production of Alaska is down. Because more than two thirds of Alaska’s tax revenue comes from the oil and natural gas industry, revenues have fallen and the state faces a huge budget deficit. This red state is now considering the worst solution: one of the largest tax increases Juneau has ever seen.

Alaska is one of those states that have so much oil and gas revenue that it gives out a “dividend check” every year to every Alaskan.

Tax increases are being discussed, including a new income and sales tax as well as a 40 percent increase in fees for oil and gas producers. The political class in Alaska seems to believe that it can tax its way to prosperity.

Alaska would suffer if it had to pay an income tax, since it is currently one of only nine states that do not tax personal income. Addition of an income tax would erode one of Alaska’s greatest advantages in the economy over other areas of the country.

A tax increase on the energy sector would also be a bad idea. The state’s golden goose is the oil and gas industry. The state’s GDP is almost half that of oil and gas production, and it provides tens and thousands of well-paying jobs. The energy industry is also responsible for most of the state’s corporate tax, which is 9%.

It would be the same as Nebraska imposing a new corn tax or Idaho trying pay its bills by levying a special tax on potatoes.

Analysts say the days of Alaska’s oil and natural gas boom are over. Nonsense. Alaska’s vast energy reserves are only scratched the surface. The North Slope oil drilling projects Willow and Pikka have abundant resources that are vital for Alaska’s economic security and America’s energy independence. The majority of coal reserves in the United States are located up north.

Any new tax on energy would discourage drilling and mining, and thus dilution the dividend fund reserves. If Alaskans are to continue receiving dividend checks every year, which have become a popular political fringe benefit in Alaska, the state must adopt policies that encourage drilling and not one that drives the industry out.

Alaska’s fiscal problems are primarily on the expenditure side. Alaska, Wyoming, and New York had the highest state and local expenditures per capita in 2020, at $17.374. To spend more per capita than New York, you have to be an avid big-spender. Alaska’s local and state expenditures are twice as much as Florida’s, and services in Anchorage and Tampa are not any better.

Alaska’s financial woes can be solved by imposing a constitutional cap on spending. Put the state government on a budget. HJR2 proposes to limit Alaska’s government spending at a certain percentage of the private sector output. The proposal would need to be approved by the voters in November.

The alternative that Governor Mike Dunleavy, and the majority of Republicans in the Legislature have is to increase taxes. This was something they campaigned strongly against. This would be a betrayal of the voters in the “read my lips style” — apart from being detrimental to the economy.

The state government, which is like the Energizer bunny, grows and grows.