Reform Key to Job Growth, Economic Health
Phoenix, AZ-In a study released today by the Goldwater Institute, economist Stephen Slivinski examines Arizona's harsh business tax climate and proposes an "la carte menu" of corporate tax reforms, projecting costs and benefits in terms of job growth and budget impact.
In "Corporate Tax Reform: How to Woo Business Without Spending a Dime," available here, Slivinski offers policymakers six different corporate tax reform options:
- Equalize state income tax rates, so the top rate for corporate income taxes is the same as that for personal income, currently 5.04 percent.
- Lower the corporate income tax rate to a regionally competitive level, from 6.97 to 4.63 percent, Colorado's flat tax rate.
- Suspend the unemployment tax for at least a year, and lower the rate thereafter.
- Suspend the unemployment tax and lower the corporate income tax rate to a regionally competitive level, thereby capturing the benefits of both tax reforms.
- Eliminate the corporate income tax, thereby increasing Arizona's competitiveness and removing the bias in the tax code against saving and investing.
- Eliminate the corporate income tax and suspend the unemployment insurance tax.
Slivinski argues that the last reform, which would eliminate the corporate income tax and suspend the unemployment insurance tax, is the best option for Arizona policymakers. This reform could create an estimated 150,000 new jobs, boost payrolls in the state by $5.4 billion, and be revenue-neutral during the first year. A permanent reduction of the unemployment insurance tax to 0.5 percent would make the option revenue-neutral for the foreseeable future.