Tax Reform

Americans are a hard-working bunch and should keep what they earn. Our ideas for tax reform reduce the burden of taxes while ensuring governments have the resources to focus on core responsibilities.

<p>Americans are a hard-working bunch and should keep what they earn. Our ideas for tax reform reduce the burden of taxes while ensuring governments have the resources to focus on core responsibilities. </p>

More than a year ago, Gov. Janet Napolitano appointed a Citizens Finance Review Commission to conduct a "top to bottom review of the state's revenue structure." On January 30, the commission issued a report recommending a tool box of possible reforms.

But the report was dead on arrival. Before the commission could issue firm recommendations, the governor burst the commission's bubble by stating that she would not pursue tax reform during the current legislative session.


Using a statistical model the VisionEcon Dynamic Revenue Model this study estimates the economic effects of repealing the corporate and personal income taxes in Arizona. In particular, it examines three specific proposals: two Goldwater Institute proposals and a proposal by former state treasurer Carol Springer. Under all three scenarios, repealing the income tax in Arizona would generate substantial employment and personal income growth when compared to the baseline trend.

The ancient Greek physician Hippocrates wrote that the most important rule for doctors is to "do no harm" to their patients. This is also a good rule for policymakers hoping to reform the Arizona tax code. In January, Governor Napolitano convened a Citizens Finance Review Commission to find a cure for our ailing tax system. But if the commission misdiagnoses the problem, its proposed remedies could end up harming the patient in the long run.

The current proposal to fund new facilities at state universities would cost more than $800 million. Any proposal of this magnitude deserves careful and thorough examination.

In an open letter to ASU alumni, ASU President Michael Crow asserts that the plan will "ensure the future economy of the state of Arizona." A recent Arizona Republic editorial concurs, saying that the potential "economic payoff is huge." The idea is that spending today will generate millions in sales, create jobs and raise state revenue.


Excess spending, not a revenue shortage, has created Arizona's mounting budget shortfall. During the 1990s, the legislature spent two of every three dollars in new revenue, and sent only one dollar in new revenue back to taxpayers. In fact, general fund spending doubled between 1990 and 2000.

All the ideas on the table for resolving the 2004 budget crisis share a fatal flaw-none of them can gain a majority of votes in the Legislature.

Democrats generally believe that permanent budget reductions would be punitive for agencies that have already suffered cuts during the crisis. They fear excessive government job loss and the inability to administer agency services.

Arizona Governor Janet Napolitano and Sen. Carolyn Allen (R-Scottsdale) recently distributed to the press a study released in the February issue of Governing Magazine. Titled "The Way We Tax," the study rates state tax systems for adequacy and fairness on a scale from one to four stars.

Our Opinion

As Arizona's political leaders try to cope with shrinking tax revenues there will be inevitable pleas from special interest groups to increase taxes on the state's residents rather than cut spending.

Some may even argue that Arizonans can afford to pay more in taxes, an idea that would seem to be supported by a recent study released by Arizona State University showing that Arizona's tax burden has fallen since 1972.

The business community is split over a referendum that would hike state cigarette taxes.

Proposition 303 would increase the levy on cigarettes from 58 cents per pack to $1.18 per pack. It would be one of the highest such taxes in the nation and put the state in the company of Massachusetts, New Jersey, and New York.

If approved by voters in November, the measure would generate an additional $149 million in revenue annually. The cash would go toward various health care and medical initiatives including emergency for the poor and public health education.