Gov. Doug Ducey has had a longtime stance in favor of reducing taxes, years ago pledging to reduce the income tax to “as close to zero as possible.” While many residents of Pinal County and Arizona appreciate keeping more of their own money, Ducey’s attempt to put a flat-tax switch into this year’s budget should be viewed with skepticism.
Yes, it is true that strong growth is likely as Arizona recovers from the pandemic. And with all the federal cash and fast vaccine availability, things have not been as bad as expected for many folks. But that is no reason to take so much advantage of a current budget surplus.
Local governments have stepped up to oppose the flat tax because they know that a reduction in state revenue means less of it going to counties and cities. There are serious consequences to raising or lowering taxes, and either should be done with caution.
The problem with reducing revenues when they are running high is that before long, they will not be. And that means a return to hard times for budgeters. The same situation has been seen in the past when spending was raised too much.
It is true that the recent passage by voters of Proposition 208 means future problems for the economy. The “tax the rich” scheme will result in a loss of some investment in Arizona, which is not a good thing. The current budget package attempts to make the highest earners whole, but some of that would be done with revenues from the lower earners.
The governor’s staff cites a desire to be more competitive with other states. That is important, but taxation should not be a race to the bottom. Arizona should be competitive, but it should not have the lowest taxes.
The passage of a budget is what quickly leads to the annual adjournment of legislators. That is overdue, but this budget needs some more work.
— Donovan Kramer Jr.