Policy should be based on need

There has been much contentious debate about changing the oil tax structure. What is being ignored is a discussion on how tax policy should be instituted.

Some of the comments suggest that if oil companies are making a substantial amount of money, then a high tax rate is appropriate. Then an idea was put forth that if the oil companies "promised" to put money into further development, the tax rate could be lowered. And, of course, it is all predicated on the national mantra of the government "getting its fair share!"

First, let me state that I reject any tax policy that assumes the government is entitled to a fair share of my income. I note that many of the people who believe the government deserves a fair share of the oil company income do not agree that the state deserves a fair share of their personal income.

This is not to say that the government has no right to tax. However, the process should be that the government first establishes the need for the requested revenue, and then establishes a tax system that provides the needed funds. Instead, we have the government demanding a fair share of your income and then deciding how to spend that money. This is wrong.

The nation has succumbed to the concept of using the tax code for behavior modification. We have luxury taxes, cigarette and alcohol taxes. So now we are going to force business to make decisions regarding drilling for oil using the state tax policy. What is next? Perhaps some in the Legislature would like to force a large tax on a major Alaska retailer, and then vote to lower the tax only if the retailer agrees to build a superstore in Bethel to serve Bush Alaska. This is not the proper way to establish tax policy.

Finally, what about those large profits? The tragedy is that in the press reports I have read there is not enough information to determine profit margins. A billion-dollar profit is meaningless until you determine whether it results in a 3 percent, 10 percent or 20 percent - or some other amount of - return on investment. Announcing profits in dollars without placing them in the investment context is grandstanding and not relevant to setting tax policy.

The fact is Alaska has a tax structure that discourages business development. It is time to review the way tax policy is set. Taxes the state collects should be sufficient to meet the needs of an efficient, lean government - and nothing more.

Marvin L. Yoder is the public/private liaison for Mat-Su Business Alliance.