What do they want…the moon?

August 10, 2009 by  

Yes – like many states dealing with record revenue-deficits with this recession, the Arizona Legislature still has not passed a budget.   But we should have – weeks ago.

We passed a budget June 30th without the dreaded one cent sales tax referral but, as promised, Governor Brewer vetoed it because it didn’t refer the tax increase to the ballot. Since then, in the current special session, Legislative leaders and Governor Brewer have focused on including one of the most important points of the Governor’s FIVE POINT PLAN to the budget mix – tax reform.  What could be called the most significant economic-recovery drivers in the nation is now part of the Arizona’s budget package – if they can get it done this week in the Senate.

If they can’t – Arizona will likely get a Democrat budget that will surely increase our structural deficit and likely cancel out most of the spending cuts we made this session.  It won’t have ANY future permanent tax cuts – only business as usual spending based on NEW job-killing taxes on services, income, alcohol, etc. etc. etc…..  No joke. 

Arizona’s tax package in question, if passed, has the potential to be the most significant set of tax reforms/economic growth generators in the nation.   Which is why Grover Norquist of the American Tax Foundation endorses the plan- even with the sales tax referral to the ballot.  As do conservative columnist Robert Robb, the AZ. Free Enterprise Club and the Arizona Chamber -calling the budget “a magnet for jobs”. 

We cannot cut our way out of a structural deficit, nor can we tax our way into prosperity- we need tax reform.  The package:   

  • Permanently cuts Arizona Individual Income Tax rates across the board by 7% ($200 million total); every taxpayer will receive a 7% income tax reduction starting Tax Year 2011. 
  • Permanently reduces the Corporate Income Tax rate from 6.968% to 4.86% ($200 million total), moving Arizona from the 23rd most competitive state to 7th best in the nation, bypassing states such as Utah, Florida, and Virginia, starting Tax Year 2011. 
  • Permanently repeals the State Equalization Property Tax, saving individuals and businesses $250 million starting Tax Year 2009. 
  • Provides for a permanent reduction in the assessment ratio for secondary property taxes on commercial property from 20% to 16%, beginning Tax Year 2012.
  • Refers Sales Tax Increase to the ballot, giving Arizona voters a say on whether they want a tax imposed on them.  By contrast, the states listed below that raised Sales Taxes did so without giving the voters a chance to decide whether they supported it or not.

Cumulatively, the tax reform measures save Arizona taxpayers $650M/year starting Tax Year 2011 ($250M of the tax cuts take affect Tax Year 2009). 

While other states are raising taxes significantly, Arizona’s budget plan, if passed, would be a major pro-growth package to support Arizona jobs, businesses, and economic activity as well as entice individuals and businesses from neighboring states and across the nation to come to Arizona to set up businesses.  

Below is a link to a recent compilation of tax changes across the states as of July 2009:   http://www.taxfoundation.org/publications/show/24855.html You will notice several states raised various taxes during the current economic recession.  In particular: 

  • 7 states raised Individual Income Taxes (IIT) in 2009 (California, Oregon, Hawaii, New Jersey, New York, Delaware, and Wisconsin) 
  • 4 states raised Sales Taxes (California, Nevada, Minnesota, and Massachusetts 
  • 10 states raised Cigarette Taxes (Arkansas, Florida, Hawaii, Kentucky, Mississippi, New Jersey, New Hampshire, Rhode Island, Vermont, and Wisconsin) 
  • 2 states raised Alcohol Taxes (New York and New Jersey) 

Conversely, 3 states lowered Individual Income Tax rates in 2009 (North Dakota, Vermont, Maine)  

Not insignificantly, the package would also allow the voters to provide the legislature with additional flexibility for the next three years to balance the budget. 

It does so by referring to the November ballot a temporary suspension of the Voter Protection Act (Proposition 105).  If approved by voters, this would enable the legislature to temporarily redirect funds from programs such as public funding for political campaigns towards core services like education and healthcare.

Let’s see – temporary flexibility for future budgeting during this economic downturn and permanent tax cuts that will spur economic growth for years to come versus a temporary one cent sales tax referral to let citizens decide the sales tax rate – seems like a no-brainer!

Unless you want the moon.

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