Whether proposed by Republicans or Democrats, tax increases cost jobs. And some taxes are even worse for employment than others. That's what a recent economic analysis of Arizona's proposed tax increases by the Beacon Hill Institute demonstrates.
A $1 billion sales tax increase would cost Arizona 14,400 private jobs. A $1 billion state income tax increase would cost even more jobs, about 26,000.
While a $1 billion increase in the sales tax would reduce investment by an estimated $141 million, reinstituting the $250 million state equalization property tax would cost even more with $189 million in lost investment. The state equalization tax, even at a quarter of the size, would have a larger negative impact on investment than a sales tax increase.
The income tax is not quite so hard on investment and the property tax not so hard on employment, but combining the two as Democrats have proposed destroys both more jobs and investment than would a sales tax increase.
Arizona's budget deficit can be closed without tax increases. From comprehensive tax reform to reducing spending to creatively structurally reforming the way we fund education and healthcare, legislators have many options to consider that will speed our economic recovery now--without ushering in a new era of unemployment--and make Arizona a magnet for jobs in the future.
Byron Schlomach, Ph.D, is director of economic policy at the Goldwater Institute.
Goldwater Institute: How to Restructure Arizona's Tax Code: A Smarter, Flatter Tax Plan to Create Jobs
Goldwater Institute: A Fresh Start for Arizona: Proposals for Closing a Billion-Dollar Budget Gap
Goldwater Institute: Saving with Systemic Change