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Thursday, September 13, 2007

ACES and the Army

There are two recent stories out of Alaska that I feel are worth mentioning:

First, the news broke today that Gov. Palin's son Track enlisted in the U.S. Army on September 11th. I have always believed that it is inappropriate for the children of political figures to be drug into political conversations, so I will simply salute the young Mr. Palin for his patriotism and leave it at that. I will not be discussing this story further unless it somehow becomes a major political issue at some point in the future.

Secondly, and more importantly for the purposes of this blog, Gov. Palin has called another special session of the Alaska Legislature to debate how oil production should be taxed. The current system, known as the Petroleum Production Tax (PPT), was voted in last year and called for oil companies to be taxed on their net profits. However, the legitimacy of that system was called into question when it was revealed that several state legislators had taken bribes from the Veco oil pipeline company in exchange for their votes in favor of the PPT.

Gov. Palin has proposed an alternative plan which she has labeled "Alaska's Clear and Equitable Share (ACES)". ACES is a hybrid system which taxes oil companies partially based on gross profits and partially based on net profits. Gov. Palin had originally supported a gross profits tax, but concluded that such a tax would not be a good deal for the oil industry. Hence, she has put forth the ACES plan in an effort to ensure that "the golden goose is fed and not killed". In the legislature, the plan has drawn the ire of both Democrats, who wanted a system based on gross profits only, and some Republicans, who want to stick with the PPT system of taxing only net profits.

Here's my take: The PPT system was bought and paid for, that is beyond dispute at this point. If the vote on any proposal is tainted by corruption, then that legislation should be reconsidered. Hence, I support the calling of the special session. As for ACES, it seems to be a solid plan to me. It eliminates the pitfalls presented by the tainted PPT, while also trying to avoid the economic ramifications of the harsher gross profits-based plans advocated by the Democrats. The legislature will have more than enough time to hash out details, and I expect the finished plan to put in place a tax that is low enough to stimulate the economy, but also fair to the people of Alaska (who do happen to own all of that oil).

While I am no economist, I think that ACES is good proposal for the legislature to start with. It is not a liberal plan, but nor is it a tainted one. The fact that Gov. Palin chose such a proposal also shows that she is willing to objectively evaluate her own positions, as she says that she was "dragged kicking and screaming, with a little bit of gnashing of teeth, even, away from the pure simple gross system." This shows me that, while Palin is a strong, decisive leader, she is also willing to listen to good advisers. I will continue watch this story with keen interest.

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