Harold Hollis: S Corp tax is a dangerous foot in the door to an income tax

By HAROLD HOLLIS

July 22, 2026 – Earlier this spring, I felt compelled to warn Alaskans on the real risk to the Alaska LNG Project.  Unfortunately events have unfolded much as I anticipated, and we are at the precipice of a legislature-induced catastrophe. Why is this happening and what are the motivations of the career politicians who are pushing the State over the edge?

Alaska stands at a critical crossroads. Under the leadership of key figures like Senate Majority Leader Cathy Giessel and Rules Committee Chair Bill Wielechowski, the Alaska Senate Majority has been persistently pushing to add a new corporate tax on pass-through entities—specifically targeting S Corporations, LLCs, and partnerships.

These politicians like to point a finger at “Texas Billionaires” but as any kid with a lemonade stand can tell you, all costs are recovered in the price of the end product. Raising the cost of the gas on the North Slope increases the cost of the pipeline project, which increases the cost to Alaska utilities, which increases the size of your utility bills. This will raise the cost of your heating bill AND your electric bill, since 85 percent of the electricity generated in Southcentral Alaska comes from natural gas.

While proponents frame this measure under the politically convenient banner of ensuring that corporations “pay their fair share,” Alaskans must see this proposal for what it truly is: an unprecedented tax expansion that breaches core tax principles, paves the way for a full-scale personal income tax, and jeopardizes Alaska’s energy security, national security, and economic future.

When Congress created the S Corporation tax exception, the underlying rationale was simple and principled: to eliminate double taxation on small-to-midsize businesses. Unlike traditional C Corporations—which pay taxes on corporate income, after which shareholders pay a second layer of personal tax on dividends—S Corporations are structured as “pass-through” entities. Earnings pass directly through to owners, who are taxed on the income via their individual tax filings.

By attempting to add an entity-level corporate tax on S Corporations, LLCs, partnerships, or sole proprietorships electing S Corp treatment, the Senate Majority is inventing corporate income policy where none exists under federal law. No other state in the nation applies corporate income taxes to entities operating under S Corp status without respecting pass-through principles. If Alaska adopts this proposal, it will stand alone as an anti-business anomaly, punishing local enterprises, joint ventures, and small businesses alike.

The immediate fallout of this tax maneuver extends far beyond accounting mechanics—it directly strikes at the viability of the Alaska LNG Project. By forcing this new pass-through tax structure onto energy developers and project partners, the Senate Majority has introduced an unviable, unfinanceable financial burden. Pipeline developers have clearly signaled that altering tax rules midway creates an uncompetitive environment that threatens vital capital investment.

This reckless policy choice undermines critical priorities across three distinct fronts: First, it threatens Alaska’s energy security. As Southcentral Alaska faces looming Cook Inlet natural gas shortages, the trans-Alaska pipeline represents the state’s best long-term solution for affordable, reliable energy. Sinking the project over a tax amendment threatens to leave Alaskans facing severe energy deficits and skyrocketing heating and power costs.

Second, it directly imperils national security. Developing North Slope natural gas and exporting LNG to key Pacific allies is vital for strategic energy independence. Furthermore, the pipeline is critical for securing a direct, stable in-state natural gas supply to Alaska’s vital military installations—including Joint Base Elmendorf-Richardson, Eielson Air Force Base, Fort Wainwright, Fort Greely, and Clear Space Force Station. Ensuring reliable domestic energy to power our strategic northern defense assets is a core element of national security, and derailing this mega-infrastructure project forfeits a generational opportunity to fortify homeland defense and support global allies.

Third, it sabotages Alaska’s economic future. Reliable and affordable energy is the absolute foundation of economic growth. Without affordable power, existing businesses cannot expand, new industries cannot take root, and working families are burdened with unsustainably high costs of living. The Alaska LNG project promises thousands of jobs, billions in private investment, and long-term state revenues. Jeopardizing a $44+ billion infrastructure build for short-term tax fights destroys the very foundation needed for long-term economic prosperity and chills future capital investment in every sector of the state’s economy.

Why are key members of the Senate Majority so fixated on pushing an S Corp tax, even attaching it as a condition to critical energy legislation? Because the ultimate prize isn’t just closing a perceived “loophole”—it is creating the legal mechanism to begin taxing personal income. The political strategy is transparent:

1. Capitalize on Populism: Sell the tax to the public under the popular banner of oil companies “paying their fair share.”

2. Establish the Mechanism: Cross the constitutional and legal line into taxing pass-through business structures that report through personal returns.

3. Expand the Reach: Once the framework exists, incrementally expand the tax base from specialized corporations down to ordinary small businesses, sole proprietorships, and eventually, the personal income of every working Alaskan.

Legislators like Senators Giessel and Wielechowski know that a direct, standalone personal income tax is politically unpopular and nearly impossible to pass outright. Therefore, their strategy relies on an incremental approach. If they cannot get a general income tax through the front door, they will open the side door via the S Corp election.Alaska’s lack of a personal income tax has long been one of its greatest economic advantages—attracting entrepreneurs, incentivizing private investment, and protecting working families.

Attempts to upend established federal tax rationale—while risking the Alaska LNG Project, military energy security, and the foundation of Alaska’s economic growth—put the state’s future in grave danger. Lawmakers must reject this attempt to tax S Corporations, preserve the pass-through protections that businesses rely on, shut the door to a state personal income tax once and for all, and let Alaska build its energy future.

Harold Hollis is a professional engineer with over 40 years of Alaska design, engineering, and construction experience in Alaska, much of it in the oil and gas industry.