Sarah Palin’s Fiscal Conservatism: Raising Revenues While Reforming Spending

Curiously enough, Joshua Green of The Atlantic seems to find something “cultic” about our interest in exploring the facts about Sarah Palin’s record and accomplishments as Governor. One would think that a fellow journalist might be more interested in analyzing the data and getting the facts straight than in taking a gratuitous slap at Governor Palin by twisting the narrative to fit his own agenda.

Green avers that Alaska’s fiscal situation improved “largely because Palin raised taxes. Specifically, the state oil tax.” This is a sloppy mischaracterization of Governor Palin’s actual record. Granted, it’s a tempting point to stretch if your main goal is to undermine Palin’s authority to criticize President Obama’s obsession with raising taxes in the teeth of a recession; but the fact remains that Palin’s so-called “tax increase” bears little structural or functional resemblance to the raising of tax rates on individuals or businesses that we commonly call “raising taxes,” or, according to Obama, “Sharing the sacrifice,” or “Spreading the wealth around.”

So, for the record, here’s the reality about the “tax increase” embodied by ACES, one of Sarah Palin’s signature achievements as Governor. We have written about ACES extensively. ACES stands for Alaska’s Clear and Equitable Share, and it was an oil tax structure that Governor Palin championed early in her administration to replace the corruption and crony capitalism-tinged tax structure of the past. ACES was negotiated and passed in a transparent manner without inappropriate influence from the oil companies, and it embraced two key tenets of the Alaska constitution—that the natural resources belong to the people of Alaska and that resources are supposed to be developed for the maximum benefit of the people. ACES was a severance tax—a tax on companies for extracting an irreplaceable natural resource from a state—on the oil companies that provided Alaskans with their appropriate share from the development of resources, gave flexibility in taxation dependent upon oil prices, and incentivized companies to further exploration and development. ACES allowed for the people of Alaska (the resource owners per their state constitution) to receive a return on their “share” of the natural resources—in much the same way as a land owner receives a share of the profits if they outsource development of their land (a natural resource in its own right).

Greene also observes that “there’s a direct line between increased revenue and improved fiscal health.” While this is true, he conveniently overlooks what Stacy wrote in her post about Alaska’s AAA rating and what made such a ratings upgrade possible (emphasis added):

Governor Palin served Alaska during a time when oil prices were high, but she put into place measures that allowed the state’s financial reserves to grow, instead of being grossly mismanaged by undisciplined bureaucrats. She also reduced Alaska’s liabilities by 34.6%, as was addressed yesterday. Her forward focused fiscal prudence, in addition to the fact that she addressed Alaska’s financial liabilities, likely gave Moody’s the needed assurance of the state’s fiscal seriousness to increase Alaska’s credit rating. Could we expect the current federal leadership to address liabilities to show rating agencies that America is serious about our fiscal health? Is there any question that the United States government would squander large revenues under the current leadership?

Greene is disingenuous to overlook the fact that Stacy addressed increased revenues. What she questioned, though, is how the current Administration would use increased revenue. Would President Obama’s team subsequently cut their spending by nearly 9.5%? Would they reform government worker pensions and pay down liabilities?  These are all things that Governor Palin did when higher revenues were rolling in, and nothing in this administration’s tenure would suggest that they would do the same. Governor Palin’s oil tax structure was implemented to ensure that the Alaska constitution was being upheld and that the resource owners were receiving a return on their “shares,” and when increased revenues came in, she used them to improve Alaska’s fiscal health by addressing the very indicators that rating agencies evaluate.



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