Editing Trans-Alaska Pipeline System (section)

=== Economy of Alaska ===
{{update section|date=May 2024}}
{{main|Economy of Alaska}}
{{see also|Alaska Permanent Fund}}
{{Quote box
 | quote  = The wealth generated by Prudhoe Bay and the other fields on the North Slope since 1977 is worth more than all the fish ever caught, all the furs ever trapped, all the trees chopped down; throw in all the copper, whalebone, natural gas, tin, silver, platinum, and anything else ever extracted from Alaska too. The balance sheet of Alaskan history is simple: One Prudhoe Bay is worth more in real dollars than everything that has been dug out, cut down, caught or killed in Alaska since the beginning of time.<ref name="AJCtransform"/>
 | source = Alaska historian Terrence Cole
 | width  = 33%
 | align  = right
}}

Since the completion of the Trans-Alaska Pipeline System in 1977,<ref name=vcaofo/> the government of the state of Alaska has been reliant on taxes paid by oil producers and shippers. Prior to 1976, Alaska's personal income tax rate was 14.5 percent—the highest in the United States.<ref name="Mead349">Mead, p. 349</ref> The gross state product was $8&nbsp;billion, and Alaskans earned $5 billion in personal income.<ref name="AJCtransform">Fried, Neal. [http://alaskajournal.com/stories/062407/opi_20070624014.shtml "Alaska's economic landscape was transformed by oil"], ''[[Alaska Journal of Commerce]]''. June 24, 2007. Accessed July 28, 2009. {{webarchive |url=https://web.archive.org/web/20071009001411/http://alaskajournal.com/stories/062407/opi_20070624014.shtml |date=October 9, 2007 }}</ref> Thirty years after the pipeline began operating, the state had no personal income tax, the gross state product was $39&nbsp;billion, and Alaskans earned $25&nbsp;billion in personal income.<ref name="AJCtransform"/> Alaska moved from the most heavily taxed state to the most tax-free state.<ref name="Mead349"/><ref>The Tax Foundation. [http://www.taxfoundation.org/taxdata/show/440.html#sl_burden_alaska-20080807 "Alaska's State and Local Tax Burden, 1977–2008"], Tax Data. Accessed July 28, 2009.</ref>

The difference was the Trans-Alaska Pipeline System and the taxes and revenue it brought to Alaska.<ref name="AJCtransform"/> Alyeska and the oil companies injected billions of dollars into the Alaska economy during the construction effort and the years afterward.<ref>Bradner, Tim. [http://alaskajournal.com/stories/062407/foc_20070624001.shtml "Prudhoe Bay: 30 years later"], ''Alaska Journal of Commerce''. June 24, 2007. Accessed July 28, 2009. {{webarchive |url=https://web.archive.org/web/20070713190124/http://alaskajournal.com/stories/062407/foc_20070624001.shtml |date=July 13, 2007 }}</ref> In addition, the taxes paid by those companies altered the tax structure of the state. By 1982, five years after the pipeline started transporting oil, 86.5 percent of Alaska revenue came directly from the petroleum industry.<ref>Naske, p. 272</ref>

The series of taxes levied on oil production in Alaska has changed several times since 1977, but the overall form remains mostly the same.<ref>Gold, Russell and Carlton, Jim. [https://www.wsj.com/articles/SB115534505947234002 "Alaska approves revised law lifting taxes for oil companies"], ''[[Wall Street Journal]]''. August 12, 2006. Accessed July 28, 2009. {{cite web |url=http://online.wsj.com/public/article_print/SB115534505947234002-CODSFcm4d1yfit_tvOaNiR4J374_20070812.html |title=Alaska Approves Revised Law Lifting Taxes for Oil Companies – WSJ.com |access-date=July 29, 2009 |url-status=dead |archive-url=https://web.archive.org/web/20090828105637/http://online.wsj.com/public/article_print/SB115534505947234002-CODSFcm4d1yfit_tvOaNiR4J374_20070812.html |archive-date=August 28, 2009 }}</ref><ref name="latest oil taxes">Bradner, Tim. [http://alaskajournal.com/stories/121107/leg_20071211021.shtml "A Journal overview on the new oil tax bill"], ''Alaska Journal of Commerce''. December 11, 2007. Accessed July 28, 2009. {{webarchive |url=https://web.archive.org/web/20090828072815/http://alaskajournal.com/stories/121107/leg_20071211021.shtml |date=August 28, 2009 }}</ref> Alaska receives royalties from oil production on state land. The state also has a property tax on oil production structures and transportation (pipeline) property—the only state property tax in Alaska. There is a special corporate income tax on petroleum companies, and the state taxes the amount of petroleum produced. This production tax is levied on the cost of oil at Pump Station 1. To calculate this tax, the state takes the market value of the oil, subtracts transportation costs (tanker and pipeline tariffs), subtracts production costs, then multiplies the resulting amount per barrel of oil produced each month. The state then takes a percentage of the dollar figure produced.<ref>Bradner, Tim. [http://alaskajournal.com/stories/091607/og__20070916007.shtml "How Alaska's oil and gas tax system works"], ''Alaska Journal of Commerce''. September 16, 2007. Accessed July 28, 2009. {{webarchive |url=https://web.archive.org/web/20090828072810/http://alaskajournal.com/stories/091607/og__20070916007.shtml |date=August 28, 2009 }}</ref>

Under the latest taxation system, introduced by former governor [[Sarah Palin]] in 2007 and passed by the Alaska Legislature that year, the maximum tax rate on profits is 50 percent. The rate fluctuates based on the cost of oil, with lower prices incurring lower tax rates.<ref name="latest oil taxes"/> The state also claims 12.5 percent of all oil produced in the state. This "royalty oil" is not taxed but is sold back to the oil companies, generating additional revenue.<ref name="Human">Alaska Humanities Forum. [http://www.akhistorycourse.org/articles/article.php?artID=257 "Modern Alaska: Alaska Permanent Fund"] {{Webarchive|url=https://web.archive.org/web/20160303230349/http://www.akhistorycourse.org/articles/article.php?artID=257 |date=March 3, 2016 }}, akhistorycourse.org. Accessed July 28, 2009.</ref> At a local level, the pipeline owners pay property taxes on the portions of the pipeline and the pipeline facilities that lay within districts that impose a property tax. This property tax is based on the pipeline's value (as assessed by the state) and the local property tax rate. In the [[Fairbanks North Star Borough]], for example, pipeline owners paid $9.2 million in property taxes—approximately 10 percent of all property taxes paid in the borough.<ref>Editorial. "Pipeline payments", ''[[Fairbanks Daily News-Miner]]''. June 21, 2009. Accessed July 28, 2009.</ref>

[[File:Alaska Crude Oil Production.PNG|thumb|left|Alaska oil production peaked in 1988.]]

The enormous amount of public revenue created by the pipeline provoked debates about what to do with the windfall. The record $900 million created by the Prudhoe Bay oil lease sale took place at a time when the entire state budget was less than $118 million,<ref name="Mead349"/> yet the entire amount created by the sale was used up by 1975.<ref>Mead, p. 350</ref> Taxes on the pipeline and oil carried by it promised to bring even more money into state coffers. To ensure that oil revenue wasn't spent as it came in, the Alaska Legislature and governor [[Jay Hammond]] proposed the creation of an [[Alaska Permanent Fund]]—a long-term savings account for the state.<ref>Alan Austerman. {{usurped|1=[https://web.archive.org/web/20090828062510/http://www.akrepublicans.org/pastlegs/opedausterman105051999.htm "Alaska Permanent Fund history recapped"]}}, akrepublicans.org. May 5, 1999. Accessed July 28, 2009.</ref> This measure required a constitutional amendment, which was duly passed in November 1976. The amendment requires at least 25 percent of mineral extraction revenue to be deposited in the Permanent Fund.<ref>Alaska Permanent Fund Corporation. [http://www.apfc.org/home/Content/fundlaw/constAndLaw.cfm "Alaska constitution and law pertaining to the Permanent Fund"], apfc.org. Accessed July 28, 2009. {{webarchive |url=https://web.archive.org/web/20090415083955/http://www.apfc.org/home/Content/fundlaw/constAndLaw.cfm |date=April 15, 2009 }}</ref> On February 28, 1977, the first deposit—$734,000—was put into the Permanent Fund. That deposit and subsequent ones were invested entirely in bonds, but debates quickly arose about the style of investments and what they should be used for.<ref>Alaska Permanent Fund Corporation. [http://www.apfc.org/home/Content/reportspublications/fundHistoryA.cfm "Landmarks in Permanent Fund history: 1968–1977 period"], apfc.org. Accessed July 28, 2009. {{webarchive |url=https://web.archive.org/web/20090828065122/http://www.apfc.org/home/Content/reportspublications/fundHistoryA.cfm |date=August 28, 2009 }}</ref>

In 1980, the Alaska Legislature created the Alaska Permanent Fund Corporation to manage the investments of the Permanent Fund, and it passed the Permanent Fund Dividend program, which provided for annual payments to Alaskans from the interest earned by the fund. After two years of legal arguments about who should be eligible for payments, the first checks were distributed to Alaskans.<ref>Alaska Permanent Fund Corporation. [http://www.apfc.org/home/Content/reportspublications/fundHistoryB.cfm "Landmarks in Permanent Fund history: 1980–1990 period"], apfc.org. Accessed July 28, 2009. {{webarchive |url=https://web.archive.org/web/20090828065127/http://www.apfc.org/home/Content/reportspublications/fundHistoryB.cfm |date=August 28, 2009 }}</ref> After peaking at more than $40 billion in 2007, the fund's value declined to approximately $26 billion as of summer 2009.<ref>Alaska Permanent Fund Corporation. [http://www.apfc.org/home/Content/reportspublications/fundHistoryD.cfm "Landmarks in Permanent Fund history: 2002–present"], apfc.org. Accessed July 28, 2009. {{webarchive |url=https://web.archive.org/web/20090828065143/http://www.apfc.org/home/Content/reportspublications/fundHistoryD.cfm |date=August 28, 2009 }}</ref> In addition to the Permanent Fund, the state also maintains the [[Alaska Permanent Fund#Constitutional Budget Reserve (CBR)|Constitutional Budget Reserve]], a separate savings account established in 1990 after a legal dispute over pipeline tariffs generated a one-time payment of more than $1.5 billion from the oil companies.<ref>Loy, Wesley. [http://www.adn.com/news/government/story/671129.html "Alaska budget reserve suffers billion-dollar loss"], [[Anchorage Daily News]]. January 28, 2009. Accessed July 28, 2009. {{webarchive |url=https://web.archive.org/web/20090605232213/http://www.adn.com/news/government/story/671129.html |date=June 5, 2009 }}</ref> The Constitutional Budget reserve is run similar to the Permanent Fund, but money from it can be withdrawn to pay for the state's annual budget, unlike the Permanent Fund.<ref name="Human"/>