The former governor has a lot to teach Washington about earning a strong credit rating. Her secret: raise taxes.

 

This is unquestionably a good thing for the people of Alaska, just as the country's downgrade is a bad thing.   The state enjoys lower borrowing costs as a result.  But especially in light of the current dysfunction in Washington, it's important to understand whyAlaska's fiscal situation improved:  It was largely because Palin raised taxes. Specifically, the state oil tax.   Her central achievement as governor was signing a law, Alaska's Clear and Equitable Share (ACES), that dramatically increased the state's share of oil profits just as oil prices began to take off.   There's a direct line between increased revenue and improved fiscal health. (Alas, the good folks at Conservatives4Palin have posted a gloating item about Alaska's credit-rating that both attacks Obama for raising taxes and neglects to mention that Palin's own tax increase was the basis for the improvement.)

This chart from the Alaska Department of Revenue nicely illustrates the result. For purposes of comparison, ACES is best measured against EFL, since the intervening tax (PPT) was tarnished by corruption and ultimately replaced by ACES, a story recounted in my piece: