The passage of Proposition 126, the Protect Arizona Taxpayers Act, is good for business, good for families and good for the economic growth of the state. Arizona’s economy is one of the nation’s leaders in job creation, personal income growth and population growth. This economic growth means more tax revenue is being generated, and a tax on services could have put that economic momentum at risk.
When more than 1.4 million Arizona voters voted to pass Proposition 126, they sent a clear message to the state government that they don’t want to be taxed more for services. The passage of the proposition prevented taxes that would increase the costs of childcare, healthcare, hair salons, car
repairs, home repairs, the home buying process and numerous other everyday services.
Proposition 126 strengthened the economic future of Arizona and the voters support that future. Proposition 126 added certainty for our state, in that politicians cannot now simply change or interpret the law to allow sales taxes on services.
The narrative that the legislature’s hands are tied to raise taxes and revenues because of Proposition 126 seems disingenuous, because all the voters have said is that they expect our lawmakers to find sources of revenue other than taxing services. The proposition simply provides definitive protections for citizens and small businesses from a tax on services, which will, in turn, help our economy grow and improve the well-being of all Arizonans.
Proposition 126 does not affect any revenue sources that are currently in place nor does it prevent lawmakers from raising any necessary revenue. In fact, Proposition 126 is revenue-neutral since Arizona does not currently impose a broad sales tax on services. Therefore, its passage had no financial impact on state and local governments.
Arizona’s corporate tax rate is one of the lowest in the nation. Arizona’s Joint Legislative Budget Committee estimates that nearly half a billion dollars in state revenues have been foregone as a result of corporate tax cuts since 2011. If our legislature is interested in raising revenue, a potential place to start would be with a moratorium on future tax cuts and to analyze the current tax cuts in place.
Further, nothing in Proposition 126 prohibits increasing sales taxes, increasing income taxes, or implementing a digital goods tax. The billions of dollars in potential taxes on tangible personal property, that are currently not subject to sales tax, is another potential source of revenue.
However, notably, Arizona is the fifth most sales tax reliant state in the nation, behind Washington, Tennessee, South Dakota, and Nevada. But none of those other states have an income tax (Tennesseans do pay taxes on investment income).
Arizona voters sent a clear message to our elected representatives when they overwhelmingly passed Proposition 126. The will of the voters should be respected.
Michelle Lind is the CEO of Arizona REALTORS®.