August 11, 2008
Palin Not Pure As Snow
She increased a “windfall profits” tax on oil companies. Ed Morrissey has the story:
John McCain and nearly every economist agrees that a windfall-profits tax on the oil industry would drive away investment, increase prices to consumers, and make Americans more dependent on foreign oil. If anyone wants to see that in microcosm, they only need look at Alaska. With the backing of Governor Sarah Palin, the state managed to drive away investment in development by hiking taxes on oil companies drilling on state lands….
In fact, Palin’s plan looks similar in concept to Barack Obama’s plan. The state gave Alaskans $1200 checks from oil revenues as a one-time bonus to pay for increased fuel prices, a move Palin pushed. That echoes the Obama plan to send one-time rebates to taxpayers, funded by similar levies on oil companies.
However, the results in Alaska should warn the rest of the country about pursuing this policy. Already oil companies have stopped drilling on state lands, thanks to the tax burden Alaska imposes. It should be cheaper to drill and extract from these areas, but the oil companies have decided to focus their investment instead on the Gulf, where the costs and risks would normally be higher. In Alaska, the government takes 75% of the price on a barrel of oil at current prices, which gives them no incentive to work there.
I’d known about this for months, but I assumed that Palin’s “windfall profits tax” must be somehow a “good tax” and materially different than Obama’s. I guess not, if Morrissey is to be believed. This underscores a point I made in the comments section a few days ago. I said something like “I think Pawlenty is probably more conservative then Palin, and would institute more conservative policies. But, because Palin is so unknown she’d have an easier time exciting members of every constituency, because they can project their hopes onto her”. Larry Kudlow did it rather memorably more then a month ago, challenging Palin to attack Obama’s support for a windfall profits tax, only to see her admit she’d supported something similar. Watch the video:
3:45 to 4:15 is the relevant section.
http://race42008.com/2008/08/11/palin-not-pure-as-snow/trackback/
August 11th, 2008 at 9:34 am
75%? That’s highway robbery! Are we sure that figure is correct? No wonder the residents want them to drill so much.
August 11th, 2008 at 9:39 am
Looks like her perceived strength is actually her weakness.
August 11th, 2008 at 9:55 am
say it ain’t so, Joe
August 11th, 2008 at 11:01 am
I am a big fan of Ed Morrissey, but he missed two important facts in his article.
1) While I am against corporate taxes, many politicians in Alaska have been convicted and sent to jail for receiving bribes in exchange for giving these companies lower taxes rates. Palin was elected on a mandate to reverse this.
2) Some towns in Alaska are paying as much as $9 per gallon for gas, and these towns are “closing down”. This recession was caused by the Federal governments refusal to allow Alaska to expand production. Palin had no choice but to provide relief, as a bridge, until the Federal Government allows for drilling in ANWR and OCS.
August 11th, 2008 at 11:12 am
Point 1) “Last year, as part of a major federal corruption investigation, an oil-services executive — former VECO Chairman Bill Allen — pleaded guilty to bribing some state legislators as he sought to limit the size of an oil-tax increase approved in 2006.”
This part of the article hsa been glossed over. I am from AK and a family member of mine is in the Alaska State House. The oil tax was re-evaluated and raised after it was revealed that oil industry executives were BRIBING GOVT OFFICIALS as part of an effort to get their way, and the tax only went up 2.5%. Palin was cleaning up after the previous Murkowski administration, and don’t forget that Murkowski’s Chief of Staff was convicted last year for taking bribes from the oil industry.
Point 2) Since AK has no state income tax or sales tax, the only way for the state to help ease the highest average fuel and home heating costs in the entire country was to disburse tax money back to the citizenry. Really, the only taxes the state collects come from natural resource extraction, so there weren’t really any other alternatives for the state to tap.
I wouldn’t shed any tears if Gov. Palin was not on the ticket this year, but this article is playing on people’s ignorence of what is actually happening in Alaska. I don’t mean anything personal, but I felt the need to point these things out.
August 11th, 2008 at 11:13 am
She’s under investigation for abuse of power. Forget her.
August 11th, 2008 at 11:15 am
Here is what Palin sdaid about Obama’s windfall profits tax.
“The Governor did question the means to pay for Obama’s proposed rebate — a windfall profits tax on oil companies. In Alaska, the state’s resource valuation system, ACES, provides strong incentives for companies to re-invest their profits in new production.
“Windfall profits taxes alone prevent additional investment in domestic production. Without new supplies from American reserves, our dependency and addiction to foreign sources of oil will continue,” Governor Palin said.”
August 11th, 2008 at 11:16 am
Kristofer totally beat me! Brilliant points, my man!
August 11th, 2008 at 11:42 am
She may be under investigation, but she is innocent.
August 11th, 2008 at 12:59 pm
#4 and 5. . . Thank you for posting those responses. There are so many things wrong with this article it’s not even funny.
I love the line about “driving away investment.” Where exactly did that happen? Not here in AK, where the oil companies are fighting over who gets to build the next gas pipeline, Exxon is suing the state to regain control over North Slope deposits, BP is increasing it’s off-shore drilling near Prudhoe Bay, and all the oil companies are trying to gain drilling rights in the Beaufort Sea and Chukchi Sea.
It’s also important to note that the oil in Alaska does not belong to the oil companies. Our state constitution declares that the oil belongs to the Alaskan people. Simply speaking, the oil compoanies pay leasing fees for the right to drill that oil. They pay AK a percentage of their profits for those rights. Currently those fees are among the lowest in the industrialized world. One only needs to look to Alberta to see what happens when really high windfall taxes are imposed.
August 11th, 2008 at 1:00 pm
#10, you are correct, in essence, the Oil companies “rent” the land from the citizens of Alaska.
August 11th, 2008 at 5:39 pm
Alaska, what does the 75% in the article refer to then? If its a low fee, that would be completely different.
August 11th, 2008 at 6:06 pm
There is no “driving away investment” in the oil patch of Alaska. All the majors and a lot of the minors are clamoring to develop in Alaska. Competition is good.
By the way the people of the State of Alaska own – literally OWN – the oil and gas resources in our state. Ask yourself what percentage you would ask if Exxon wanted to come into your back yard and drill. We only charge 25%.
August 11th, 2008 at 7:21 pm
“….by hiking taxes on oil companies drilling on STATE lands”.
Look folks, this oil is NOT coming out of Jed Clampett’s land and it’s NOT coming out of “Oil Company” lands either. THIS IS STATE OF ALASKA LAND AND THE OIL THEY ARE PUMPING & SELLING OIL BELONGS TO THE PEOPLE OF ALASKA.
This “tax” is revenue sharing folks. The people own it, and the people of Alaska should be compensated for it. The oil companies should be grateful as THEY are the ones getting the windfall by selling oil they do not own. It’s no different than revenue sharing agreements made to timber companies across the United States.
The big scandal in Alaska that has put many politicians under indictment was all about this “tax” and the politicians who were bribed by the oil industry to lower it. Who do you think is responsible for this being brought up here?
Gov. Palin was responsible for the clean up of this corruption. She and the legislature went back and passed new legislation that put the revenue sharing at the rate it would have been had the corrupt politicians not been bribed.
None of you seem to know the facts of all this, so how about giving Palin some slack. She’s doing a GREAT job even with all her political enemies coming up with false allegations to try and smear her. Her ememies go from the top to the bottom in Alaska’s corrupt politics/oil.
That’s what happens to you when you throw the staus quo good ole boys in prison.
August 11th, 2008 at 8:01 pm
This money is royalties folks. Just like if they were paying a landowner for the oil they find on the landowner’s land.
To wrap this up and hold it up as comparison to Obama’s Windfall Profits Tax is dishonest.
The Oil Companies didn’t succeed in bribing legislators for a lower rate, so now they are playing a game of poker with Palin and the legislature to try to get the rate of revenue sharing lowered by bluffing. The idea that they are actually pulling away from drilling in Alaska is ludicrous. See what would happen if Palin tried to pull their rights to drill on those lands. They’d have a fit and immediately sue.
Have none of you ever played poker?
August 11th, 2008 at 8:16 pm
Sarah Palin is the first Alaska politician in a long time who has not been owned by the oil companies. As the governor likes to state, there are oil industry people currently in prison for bribing Alaska officials to increase big oil profitability.
Alaska made $10 billion last year in oil revenues. When Lee Raymond retired from Exxon-Mobil, the Board of Directors (most of whom he had appolited) rewarded him with a $400 million retirement package. Who is screwing America – Sarah Palin or Lee Raymond?
August 11th, 2008 at 8:29 pm
“Ed Morrissey has the story:”
The simple fact is that Ed Morrissey picked up a story verabtum from the Seattle Times, which is standard operating procedure for Morrisey.
Sarah Palin has taken on a corrupt establishment and big oil for the good of Alaska.
There’s nothing the big oil companies would like better that replacing Sarah Palin with a puppet they can control. Big oil is dedicated to destroying her.