Lottery winners make poor fiscal conservatives
Monday, September 29, 2008 1:33 PM PDT
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E-mail this articleCommentary by Edward L. Phillips
For The Daily News
As a former resident of Anchorage, Alaska, I appreciated the article by Mike Doogan (“She’s nice-but not ready”) that appeared in the Sept. 11 Daily News. I remember enjoying his columns in the Anchorage Daily News.
Now he is part of the political establishment and that colors his views toward Gov. Palin. She, as well as he, is a product of the Alaskan political environment and that environment is unique.
Until the discovery of Prudhoe Bay’s oil in 1968, Alaska was underdeveloped and cash poor. With the discovery, Alaska became a lottery winner. The first evidence of this jackpot was the 1969 lease sale of remaining Prudhoe Bay leases for $900 million dollars. This oil windfall has created a unique political culture in Alaska. Legislators don’t have to burden the citizenry with taxes to fund projects. The only constraint on spending is oil revenue.
Since oil production commenced in 1977 the state has been awash in oil revenues, so much so that the state income tax was abolished in 1979 and the state has no major non petroleum sources of revenue (though they lead the nation in federal spending per capita). Petroleum-based revenues currently account for about 86 percent of state revenues. Alaska ranks dead last in taxes per capita and first in expenditures per capita. What a great place to be a legislator!
The political virtue of levying taxes on the oil companies is that the tax burden falls on stockholders, most of whom are non residents. The Alaskan politicians have been very creative in adjusting tax rates and levying special taxes on non-resident stockholders to resolve short-run fiscal problems. In the mid 1970s they even levied a tax on projected future oil production before a single barrel was produced from Prudhoe Bay.
Both political parties embrace a form of anti-corporate fiscal populism as do the citizens. Some politicians of both parties opposed the repeal of the state income tax in 1979, but they were a distinct minority. The repeal was very popular with almost all of the Republican politicians. Advocating an actual tax on the state’s citizens will not get one elected in Alaska. It is not clear how Alaskan political experience prepares one for national fiscal issues where actual citizens have to bear the burden (now or later) of fiscal decisions.
The current run up of oil prices has extended Alaska’s lottery winnings beyond the wildest of expectations, but oil fields do decline and North Slope production is less than a third of its early ‘80s peak.
The next big hopes for Alaskan tax prevention is the gas pipeline and the export of gas to the “lower 48.” But those revenues are at least several years off. Drilling and discovery of reserves in ANWR would also be a source of revenue, but the politics of drilling in the wildlife refuge are too complicated for mere mortals to comprehend.
Both candidates for the presidency have practiced politics in the “normal” world, where taxing and spending decisions are borne by actual constituents. Gov. Palin has never had to exercise fiscal conservatism in the normal meaning of that term. I’m not sure that the vice presidency is the ideal position for on-the-job-training.
Edward L. Phillips resides in Kalama.
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