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Posted by on Sep 9, 2008 in Economy | 7 comments

Palinomics in Alaska – Taxing and spending

I was surprised at how hard Republicans hit Obama on taxes last week. Of all the problems that have been on voters’ minds in the last few months—Iraq, health care, the housing market, gas prices, etc.—I would guess that high taxes are pretty low on the list of concerns.

And it seems like an easy enough issue for Obama to counter. Most Amercians would receive a bigger income tax break under his plan than McCain’s, and if you’re going to argue that tax cuts will spur economic growth, it would be a lot easier to do if we weren’t in a bad economy under a President that enacted massive tax cuts.

Still, if that’s your party’s bread and butter and the argument you’re going to stake the White House on, you might want to vet your VP pick a little more thoroughly. Time has the scoop on the Alaskan economic environment:

Of the 50 states, Alaska ranks No. 1 in taxes per resident and No. 1 in spending per resident. Its tax burden per resident is 2 1/2 times the national average; its spending, more than double. The trick is that Alaska’s government spends money on its own citizens and taxes the rest of us to pay for it.

As if it couldn’t support itself, Alaska also ranks No. 1, year after year, in money it sucks in from Washington. In 2005 (the most recent figures), according to the Tax Foundation, Alaska ranked 18th in federal taxes paid per resident ($5,434) but first in federal spending received per resident ($13,950). Its ratio of federal spending received to federal taxes paid ranks third among the 50 states, and in the absolute amount it receives from Washington over and above the amount it sends to Washington, Alaska ranks No. 1.

Perhaps the most shocking stat is that 89% of the state’s unrestricted revenue comes from four different taxes on oil.

On average, three-quarters of the value of a barrel of oil is taken by the state government before that oil is permitted to leave the state. Alaska residents each get a yearly check for about $2,000 from oil revenues, plus an additional $1,200 pushed through by Palin last year to take advantage of rising oil prices.

No wonder Palin wants to open up ANWR for drilling. Her state would make a fortune.

Granted, a lot of these economic conditions existed in the state before Palin took over, and she may handle taxing and spending very differently in the White House. But it still presents a political problem. And if you add it to the Bridge to Nowhere distortion, a pretty unfavorable picture starts to emerge. How does the McCain camp counter this? Liberal bloggers have jumped on the story, but I haven’t seen much conservative commentary. Is there a rational argument, or will we hear more talking points about tax-and-spend liberals?

I know you could argue that Alaska’s low population per square mile requires more spending than an average tax rate could provide. But that would require acknowledging that taxes and redistribution are necessary. That’s too much nuance for a talking point.