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Arizona’s economy does not need a tax increase

No new taxes

Arizona’s economy is just starting to come back from a devastating spring and summer due to the pandemic shutdowns. The last thing we should do is pump the breaks on the recovery by putting in place the largest permanent tax increase in state history.

The proposed $1 billion-per-year tax increase is marketed as going to K-12 education, but how exactly will it be spent? Over the last few years, we have invested a lot in education in Arizona. In three years, enough money was designated to give teachers a 20% raise, and we currently allocate more than 50% of our state’s $11 billion general fund to support K-12 education. That percentage runs even higher if you add in funding for colleges and universities.

Like every campaign to increase taxes, the proponents of Proposition 208 brand it as only “a tax increase on the wealthy.” They are trying to conjure the image of making rich Uncle Pennybags from Monopoly, wearing a top hat and monocle and smoking a cigar with his feet on a desk, have to pay more in taxes. But the truth is that this tax increase will hit our greatest job creators the hardest, such as our small business owners and entrepreneurs.

It is an income tax increase that will nearly double the state income tax for individuals with income of over $250,000, including couples that take in over $500,000. While this sounds like a lot for most people, it does not take into consideration that many start-up companies and small business owners file their taxes as sole proprietorships—in other words, they file as individuals. If a small business is taking in less than $250,000 per year, they probably won’t be in business for long.

Kelli Ward (Photo by Gage Skidmore/Flickr)

Kelli Ward (Photo by Gage Skidmore/Flickr)

What’s worse, these are the very businesses that have been hit the hardest by the economic downturn caused by the pandemic. The last thing they need is an increased tax burden after months of diminished revenues. That could grind our state’s comeback to a screeching halt.

In the long term, this is a bad policy as well. We are trying to attract job creators to Arizona, not chase them away. High-tax states like New York have already seen this happen. In New York City, one percent of the population pays 50 percent of the taxes. When those people leave, the pain is very real. This led to the sad spectacle of New York Governor Andrew Cuomo begging wealthy residents to return, saying, “I’ll buy you a drink.” Ironically, thanks to the money they saved by moving, they are quite capable of buying their own drinks.

As Cuomo found out, these high income residents are “the most mobile people on the globe.” With remote work becoming easier, and even preferred, wealthy people can live anywhere.

Proposition 208 would make Arizona one of the 10 highest taxed states in America. If our tax structure signals to high-income individuals that they will be penalized for living in Arizona, they will simply choose to leave or not move here. Not only will we lose the alleged “Prop 208” revenue, we will also lose the taxes those individuals were already paying. Our economy will not benefit from the money they spend here, and the jobs they would have created will go elsewhere.

None of this will help our economy recover. A booming economy is the best way to make sure we can fund education. Proposition 208 would have the exact opposite effect than intended, which is why we must stop the largest tax increase in Arizona’s history and vote no on Proposition 208.

Dr. Kelli Ward is a family physician, two-term Arizona state senator, and the chairwoman of the Republican Party of Arizona. On Twitter: @KelliWardAZ

4 comments

  1. I created an income tax plan that raises money for education reliably & equitably as an alternative to Invest in Ed. Click on the link below to read my plan and feel free to share this with everybody.

    https://drive.google.com/file/d/1CZnD97pJ7jok0NHwNP1xu1Q-S8JGbnne/view

  2. “Trickle down” economics has been debunked many times since Reagan’s day. The idea that the rich should keep as much money as possible, in hopes that some of it will trickle down to us, has been promoted by the people who benefit from making the rich richer. It’s a lie. … And …. Arizona is growing fast, some say too fast, given water shortages now only getting worse. There is little danger that a significant number of people will go elsewhere. Ward says that “A booming economy is the best way to make sure we can fund education” yet for decades we have had a booming economy while Arizona rates close to the bottom of states in terms of how we treat our children. It’s time to change that.

  3. Connecticut has a 7% tax rate. What has that tax rate done for Connecticut? In 1992, Connecticut had as many jobs as Arizona. Connecticut hasn’t added a single job in the last 28 years.

    Arizona has added 35,000 teaching jobs alone in the last 28 years and Arizona’s average teaching salary at $50,400 according to the National Education Association. This puts a two teacher household at $100,800 while the national average is $70,000.

    Connecticut spends $20,000 per student to our $9,000 but, their Black 8th grade math scores are a year behind ours, their Hispanic math scores are significantly below ours. Even their white 8th grade math scores are only marginally higher than ours.

    For three decades, Arizona’s job creation engine has been a model for the world. Now, we will be a model for a different reason. Proposition 208 will shut down our high performance economy.

    Within four years, this tax will be shown to not yielding a penny. The short term gains will be quickly revealed to be a long-term disaster for our 90,000 high school and college graduates, graduates who need the 98,000 per jobs that Arizona created in 2019.

  4. Response to Bradley Taylor’s comment: “Trickle down” economics has been debunked many times since Reagan’s day. ”

    Nope. Reagan reduced our top tax rate from 72% to 28%. As a result, the economy grew by 23% in his last five years in office. By comparison, our economy grew by 11% in Obama’s last five years in office.

    The comparison is even more stark with the European Union. Since Reagan, our median household income increased to $67,000 (2019). By comparison, the European Union is a paltry $37,600.

    And, the tax revenues from the “rich” (successful businesses) haven’t “trickled down”, they have gushered down. In 2019, people with an adjusted gross income of $240,000 paid a stunning $1 trillion in income taxes. By comparison, European Union taxpayers with an adjusted gross income of $240,000 paid less than $500 billion in taxes despite being taken from a population 90% larger and paying a much higher percentage in income tax rates. Bottom line? Supply Sided economics was exactly correct, lower tax rates can produce much higher revenues.

    Here are the number of jobs that each of these high-tax states have lost since 2000. Think of that, not a single job created for their high-school and college graduates in the last 20 years:

    Illinois……………..negative………….-427,000 jobs
    New York……………..negative…….-230,000
    New Jersey…………negative……….-272,000
    Connecticut………..negative………..-160,000
    Massachusetts……..negative……….-172,000
    Rhode Island………negative………….-25,000
    Vermont……………negative…………..-23,000
    Hawaii……………..negative……………..-9,000
    Delaware…………..negative……………-1,000

    We are not talking about a small change with Proposition 208, we are talking about a devastating change.

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