ACES Up, Way Up: More On Palin's Tax Increase

In October 2007, Alaskan Gov. Sarah Palin called a 30-day special session to raise the state's oil tax rate.

The governor's plan is called Alaska's Clear and Equitable Share, or ACES. Clear and equitable share? Doesn't sound very free market oriented--and it isn't.

It would raise the state's current net profits tax on North Slope oil from a 22.5 percent to 25 percent base. There's also a "progressivity" surcharge where generally, when oil prices rise above roughly $50 a barrel, the tax rate increases by another .2 percent for each additional dollar a barrel. Thus, at $100 per barrel the tax jumps to 35 percent.

The bill also has a tax floor, at $40 per barrel. Palin said of her bill:

Progressiveness is the additional share we capture when oil prices and profits are high. I chose to set the progressiveness knob [i.e., the windfall profits tax] at a relatively low level in exchange for more security when prices are low. We accomplished this through a gross tax floor at our legacy fields. If the Legislature chooses to discard that floor, then the knob on progressiveness needs to be set higher — to make sure we capture a more equitable share when prices are high and profits extraordinary.

Great discourage oil drilling when prices are high, and encourage (by lowering the tax burden)when prices are low. Plain is clueless.

Get a load of this comment:

Keep in mind that the original oil tax rate recommendation was 25 percent. That's the same rate we are recommending in ACES. It has been reviewed by numerous economists with worldwide oil and gas experience. There is no dissension -- 25 percent is the right number.

No dissension? Off the top of my head, I can think of a dozen economists that would disagree with the tax. But she presents it as a fait accompli that there is no dissension. Any economic conservative or libertarian who backs this woman is displaying more a sign of a willingness to jump on a bandwagon, before knowing all the facts, than anything else.