By EJ ANTONI and SARAH WAGONER | THE DAILY SIGNAL
April 19, 2026 – As Americans grapple with painful prices at the pump amidst a global oil crisis, some Alaskan lawmakers seem intent on making that pain even worse. The 49th state is debating a tax increase on certain oil and gas companies, a measure that will make energy even more expensive and chill investment.
The state Senate shoehorned this tax hike via a Democrat-sponsored amendment into a House bill that covers a royalty agreement with Marathon Petroleum Corporation. The amendment would impose a top marginal tax rate of more than 9% on privately held oil companies, as opposed to publicly traded ones like ExxonMobil or Marathon.
It’s a messy change to Alaska’s tax system that would impose significant costs on privately held energy producers, called S corps, which have strict limits on the number of owners or shareholders. They’re often much smaller than their publicly traded brothers, the C corps. The tax hike would impose the higher taxes of C corps onto certain S corps in Alaska.
Of course, the state Senate didn’t bother vetting the knock-on effects of such a change, and no one provided any empirical modeling of the economic impact. Members of Alaska’s Legislature aren’t even sure which companies in the state would be impacted—further evidence that this change hasn’t been adequately contemplated.
Rewriting Alaska’s corporate tax code would create tremendous uncertainty in the oil sector, which already faces significant structural challenges, including declining production from mature fields, limited lease availability, and the high costs associated with exploration and development.
After years of stagnation and decline, oil production is finally projected to increase, with the U.S. Energy Information Administration forecasting growth in 2026. But that forecast is not a foregone conclusion.
Oil and gas investment is highly sensitive to policy changes, particularly for S corps that are very responsive to tax treatment when financing capital-intensive projects like oil development.
Imposing new taxes on these entities risks undermining the very investment needed to sustain and grow Alaska’s energy output and its economy. The solution to a so-called revenue shortfall is not to hike taxes, but to encourage investment.
This change would do exactly the opposite. It not only makes investment in Alaska’s oil sector less profitable, but it makes it riskier. By rewriting part of the corporate tax code to target specific companies, it’ll make other businesses and industries worry if they’ll be next to face a tax hike.
The fact is that incentives matter. If you tax something more, you get less of it. Higher taxes on energy producers organized as S corps would reduce economic activity in the sector, meaning less energy production and less domestic investment. That’s exactly the opposite of what the nation needs right now and will only exacerbate high prices at the pump.
Alaska should be encouraging exploration and production, while fast-tracking new projects. A larger energy sector is the best way to increase tax revenue, as opposed to strangling less economic activity with higher taxes.
The irony here is that the Alaska Legislature previously rejected this proposal—just last year.
Fortunately, the House also just rejected the Senate’s offending amendment, but there’s still a chance the tax hike gets shoehorned back into legislation and ends up on the governor’s desk.
Everyone, from the Alaska Legislature and governor to the American people broadly, should understand the effects we can expect from this kind of tax increase. Investment and production will fall, putting further upward pressure on energy prices. Employment in the oil and gas industry will suffer and economic growth in Alaska will be hamstrung.
All this negative fallout would be bad enough during normal times with relatively low oil prices, but it’s substantially worse with today’s elevated prices stemming from the Iran war.
Alaskan lawmakers would do well to remember the fragility of both the global energy sector abroad and the American consumer here at home before upending the tax code.
EJ Antoni is the is the Acting Director for the Thomas A. Roe Institute for Economic Policy Studies and Grover M. Hermann Center for the Federal Budget, Chief Economist, and Richard Aster Fellow at The Heritage Foundation. Sarah Wagoner an analyst of environmental and energy policy at The Heritage Foundation. This column first appeared in The Daily Signal.
6 thoughts on “At the worst possible time, Alaska lawmakers push oil tax hike that could backfire”
The oil industry has been ripping us off for decades. Time for them to pay us properly for our oil. Note that these two authors are from the Heritage Foundation, the same folks that wrote the demonic Project 2025.
Alaska leaders have no wisdom nor knowledge. They reflect Alaska voters perfectly.
EJ Etoni would be wiser to read psalm 82 and 83
It fits the struggle Alaska community leaders are to the people of Alaska
Alaska is waiting for God’s judgement to push our wicked community leaders off their plush chairs and disrupt their comfortable lives, so they humbled know that He is God Most High over all the earth.
Even if they don’t get their taxes this year, if they have a Democrat Governor in 2027 and an Aksenate and Ak house majority then they”ll get it next year and do anything more they want to make the poor, homeless, single parent household, and seniors lives more miserable and hamstrung while these same leaders pets get better food, attention and health care.
I think the authors of this article for making clear the obvious. I am encouraging all to work towards a financial arrangement that gives the S corps room to thrive and help us all become more prosperous.
Tina, you need to find a different side of the bed to get up on one of these days. Spread a little sunshine.
Giessel has become synonymous with the political “flip flop”. To be “giesseled” should become a household word for someone who turns their back on everything they used to believe in, and stabs your party and colleagues in the back. It’s her, and political acolytes like the new senator yundt pushing for higher taxes, that will kill economic growth in Alaska. Giessel and others like bjorkman and merrick, supposed republicans, have given power to democrats by joining them and ditching, I think 6(?), other republicans to give majority control of the senate to the dems. I think its happening in the house too as I recall. Those democrats by and large oppose resource development, it’s even in their own platform. The ONE thing we have an abundance of and need to develop as rapidly and responsibly as possible, are oil & gas, coal, minerals like gold, copper and rare earth metals, timber and anything else we can. We have some of the largest reserves of resources in the nation and on the planet, yet we seem afraid to dig, drill or build anything in this state. It’s a travesty. A travesty encouraged, caused by, and sustained by charlatans like giessel and her “comrades” in the alaska legislature who link arms with democrats to push a left wing, anti resource, anti development, big government, big spending agenda. It’s sickening.
Giessel should be referred to as Murkowski Lite. It’s their money not yours!