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Marcia Barlow: Families
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NEWS & ANALYSIS Make Taxes, Spending Limit Priorities By Chad Kirkpatrick and Tom Jenney Jan. 4, 2007 The Arizona Federation of Taxpayers believes these issues should be the Legislature's top priorities in 2007: Income Tax Elimination We propose replacing Arizona's personal and corporate income taxes with a low, broad-based retail sales tax (no higher than five percent). This reform has been discussed in Arizona for at least three years now (see the Goldwater-Roubik study for model projections), and was a gubernatorial campaign issue. Elimination of the state's income taxes (including the volatile, job-killing corporate income tax) in favor of a consumption tax would be single most effective measure Arizona could take in an effort to encourage growth on a vibrant, diversified economic base. Update Arizona's Spending Limit Since the last recession, Arizona's general fund has seen average annual spending increases of 12 percent. If allowed to continue growing at that rate, by 2009 the state budget will hit the state's current spending limit, which is 7.41 percent of personal income (see ch art.) The current spending trendline threatens to return Arizona to the big-government days of the 1980s. A related problem with rapid budget increases during a boom time is that they are inevitably followed by painful budget cuts in the succeeding recession—a cycle that turns the state budget into a scary rollercoaster ride. Faced with making painful budget cuts, many of our politicians will want to cave in and raise taxes. Tax increases would complete the return to the policies of the 1980s, when Arizona was not a competitive state, taxwise. To prevent those developments, AFT urges Arizona legislators to update Arizona’s current spending limit, adjusting it down from 7.41 to no higher than 6.5 percent of personal income. 6.5 is a moderate limit-- every budget from FY2000 to FY2006 would have qualified. At the same time, Arizona should continue to explore the possibility of limiting state budget growth to the rate of growth of population plus inflation. Combined with the rainy day fund, this reform would help to reduce the extreme highs and lows of the budget cycle, while ensuring that the private economy grows more quickly than the governmental sector. Property Tax Limits An explosive issue in 2006, property tax reform will reignite in 2007, when tax levies are applied to the 2006 assessed values. Property tax reform is very popular—especially Prop 13-style caps on assessed value growth—but property tax reform is also very complicated (due to educational equalization and the nature of the formulae), and often involves shifting tax burdens between different property classes and from property taxpayers to income and sales taxpayers. AFT urges legislators to look at all factors in the property tax equation: 1) capping assessed value growth; 2) reducing rates; and, 3) tightening levy limits for all categories of taxation. School Choice Because education is the state's largest budget item, school choice is a key fiscal policy initiative. Further, school choice is the only proven means of improving student performance and creating the human capital necessary for the future of the Arizona economy. Four decades of evidence shows the utter failure of increased government expenditures in improving student performance. To expand the menu of choices available to students and parents, AFT urges legislators to create a universal voucher system, expand the state's scholarship tax credits, and create a tax credit for parents who home-school their children. Health Care Rather than continuing to tinker in a piecemeal way with health insurance reforms, and rather than roping yet more Arizonans into the semi-socialist Medicaid/AHCCCS system, Arizona should open itself unilaterally to the interstate private health insurance market. Arizona health insurance consumers should be allowed to buy into any private health plan certified by any government in the 50 states. By increasing competition fiftyfold, we will greatly increase the ability of the uninsured to find economical and portable insurance plans that meet their specific needs. U.S. Rep. John Shadegg has recommended implementing a similar reform at the congressional level, but that is unlikely to make any progress in the current Congress, so Arizona should lead the way. Chad Kirkpatrick is chairman and Tom Jenney is executive director of the Arizona Federation of Taxpayers, a state chapter of Americans for Prosperity. Home |News |State Briefs |Editorials|Letters |Key Legislation |Contact Us |
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