Tax cuts are often spoken of as an unalloyed good in American politics. But the state of Alaska is learning the hard way those cuts — especially when they are for taxes on oil companies — don’t always deliver as promised.
Alaska is the only state with neither a state income tax nor a state sales tax. For revenue, it relies entirely on federal funding and various taxes on oil production in the state. Back in 2013, the oil taxes were altered by legislation passed under former Governor Sean Parnell (R). The logic of the bill — which flattened the tax rate, thus cutting the tax burden for high-dollar oil profits and raising it for low-dollar profits — was that it would spur renewed oil industry activity in the state. But that expected economic ferment has not materialized. And now, as the price of oil drops lower and lower, Alaska’s state budget is falling well into the red.