Saturday, June 03, 2006

It is taxing to be a Legislator

There has been much talk about a 30 year fixed rate on the tax structure. Some Legislators have said it would violate the Alaska Constitution.

What does the Alaska Constitution say?

Article 9 - Finance and Taxation

§ 1. Taxing Power
The power of taxation shall never be surrendered. This power shall not be suspended or contracted away, except as provided in this article.

§ 2. Nondiscrimination
The lands and other property belonging to citizens of the United States residing without the State shall never be taxed at a higher rate than the lands and other property belonging to the residents of the State.

§ 3. Assessment Standards
Standards for appraisal of all property assessed by the State or its political subdivisions shall be prescribed by law.

§ 4. Exemptions
The real and personal property of the State or its political subdivisions shall be exempt from taxation under conditions and exceptions which may be provided by law. All, or any portion of, property used exclusively for non-profit religious, charitable, cemetery, or educational purposes, as defined by law, shall be exempt from taxation. Other exemptions of like or different kind may be granted by general law. All valid existing exemptions shall be retained until otherwise provided by law.

§ 5. Interests in Government Property
Private leaseholds, contracts, or interests in land or property owned or held by the United States, the State, or its political subdivisions, shall be taxable to the extent of the interests.

What was said on the subject at the Alaska Convention?

PRESIDENT EGAN: Mr. Nerland so moves that these committee amendments be offered as part of the original committee report relative to Committee Proposal No. 9.

JOHNSON: I'll second the motion.

PRESIDENT EGAN: Seconded by Mr. Johnson. The question is, "Shall the amendments become a part of the original Committee Proposal No. 9?" All those in favor of the adoption of the proposed amendments as a part of the original report will signify by saying "aye", all opposed by saying "no". The "ayes" have it and the amendments are adopted as a part of the original report. Mr. Nerland, do you care to proceed with an explanation of the proposal?

NERLAND: Section 1 of this proposal has been altered slightly from the usual wording of a number of state constitutions and also the model state constitution in that which, as some of you perhaps might have noticed, generally reads, "The power of taxation shall never be surrendered, suspended or contracted away." The Committee felt that definitely the power of taxation should never be surrendered so we inserted a semicolon, but we did feel that there would possibly be occasion and good justification in the future for such things as allowing an industry-wide exemption to encourage new industry to come in and that is the reason for the particular wording there. That is later provided for under Section 4.

Some Legislators have said the long term tax rates are in violation of the Alaska Constitution. Given the language that Nerland addressed and the exemption, those Legislators who say the language of the contract violates the Alaska Constitution should be viewed with skepticism.

In the contract, the State of Alaska does not forfeit/suspend/contract away its right to tax. The State of Alaska is taxing the oil companies. Moreover, the State of Alaska becomes a limited partner in the pipeline. This in itself changes the intent of the power to tax.

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