Sunday, October 21, 2012

Required Reading: Roger Marks' "Unaware of unknowables: attempts at tax reform in Alaska"

A recent article in the Oil and Gas Finance Journal by former Department of Revenue oil economist, and now consultant, Roger Marks, should be required reading for those interested in Alaska oil and gas policy.

The article -- entitled "Unaware of unknowables: attempts at tax reform in Alaska" and available here -- discusses recent efforts to change Alaska's current oil tax structure and analyzes the reasoning that has been used thusfar to turn back those efforts.

One of the critical observations that Marks' makes is the role played by the Fiscal Note provided by the Department of Revenue in support of the Governor's proposed oil tax reform bill.  As Marks explains,
In looking at the fiscal (revenue) impact of reducing taxes, the Senate used the Alaska Department of Revenue (DOR) fiscal note .... The fiscal note used the same number of barrels under all tax plans. So a reduced tax could not but show a revenue decline.
[The consequence is that] the decline in revenues from the proposal in the fiscal note was depicted by many as a "giveaway," i.e., a tax cut that would result in no beneficial stimulus to production.
Talk about shooting yourself in the foot from the start.

The other observations made in Marks' piece are equally as significant.  The piece deserves a close reading and continued understanding.