As oil production continues to decline, Alaska will become ever more dependent on tax revenue sources other than black gold, according to a state economist.
Writing in the September issue of Alaska Economic Trends, state economist Dan Stickel, with the Alaska Department of Revenue, said oil tax revenue was projected to decline at an average of 2 percent per year from 2006 through 2011, while tax revenue coming from non-oil sources should increase an average of 4 percent per year.
"This divergence means that Alaska's non-oil taxes will become a more important contributor to state revenue as time passes," he said.
By 2011, Stickel noted, non-oil taxes are expected to generate some $515 million in revenue, or more than 24 percent of the total tax revenue projected for that year.
"The importance of non-oil taxes should not be underestimated," Stickel said.
Income taxes paid by corporations other than those in the petroleum industry account for the largest source of non-oil tax revenue. From 2001 to 2006, the non-oil corporate income tax has grown at an average rate of 18 percent per year, reaching $138 million in 2006, according to state figures. Part of the credit, Stickel said, goes to improved profitability in mining, fishing and tourism.
Alaska's tax on tobacco products is the second largest source of non-oil tax revenue in 2006, accounting for $65.5 million, most of that ($57.9 million) coming from cigarettes.
The tax on cigarettes grew an average of 7 percent between 2001 and 2006, most of that due the 2005 tax hike that pushed the rate from $1 to $1.60 per pack. Subsequent hikes in 2006 and 2007 have increased the rate at $2 per pack. However, Stickel points out that while taxes increased, consumption fell from 41 million packs in 2001 to 36 million in 2006.
"Over the 2006 through 2011 period, further consumption declines will likely offset the 2006 and 2007 rate increases," Stickel said. "As a result, the 2011 revenue projections are slightly lower than the $57.9 million collected in 2006.
Another non-oil revenue source is Alaska's tax on alcohol where, unlike for cigarettes, predictions are that consumption will increase.
Stickel said Alaska was following a national trend falling rates for smoking, rising rates for drinking. In 2006, alcohol generated $35.2 million in revenue, up from $12 million in 2001. That increase was largely due to substantial increases in the tax rate approved by state lawmakers in 2002.
Other non-oil tax revenue sources include:
(Tax revenues shown are for 2006)
* Insurance Premium Tax, $51.9 million
* Motor Fuel Tax, $42.1 million
* Fisheries Taxes and Assessments, $32.5 million
* Mining License Tax, $18.6 million
* Vehicle Rental Tax, $7.7 million
* Tire Fee, $1.6 million
* Charitable Gaming Tax, $2.4 million
* Electric and Telephone Tax, $3.9 million
Generating some $414.8 million in 2006, Alaska non-oil taxes represented 18 percent of the total tax revenue that year.
Hal Spence can be reached at email@example.com
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