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Eye on the Right: Arizona's Failed Experiment with Tax Cuts

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How are Arizona's right-wing legislators responding to the state's most severe fiscal crisis since the Great Depression?

Massive corporate income tax cuts, of course.

A "Corporate Bailout":  Arizona's "job recovery act" (HB2250), passed the state House of Representatives in late January and included such corporate subsidies as reducing the assessment for business property taxes, cutting the the corporate income tax rate from 6.968 to 5 percent over four years, and lowering income tax rates by 10 percent.  Ignoring demands by progressive legislators to at least postpone the vote until a fiscal impact study could be conducted, the leadership just has taken steps towards further fiscal calamity.

Opponents of the measure in the legislature point out that if businesses property taxes are reduced, homeowners will have to pay a greater share.  Rep. Tom Chabin states, "[i]t is very clear that homeowners today cannot sustain this kind of burden."  Assistant Minority Leader, Rep. Kyrsten Sinema adds, “[t]he reality is that it’s a corporate bailout package” that would harm the economy and benefit CEO's rather than the middle and working class.

How Arizona's Tax Cuts Fed Their Current Fiscal and Economic Crisis:  The state has become so averse to taxes that a picture of the Sesame Street character, Grover, hangs in the Senate Republican staff room.  The caption under the photograph reads: "Ask Grover," referring not to the beloved children's puppet, but to Grover Norquist, the head of Americans for Tax Reform, an organization that opposes raising taxes and asks lawmakers to sign on to a pledge to reject any and all increases.  Arizona has one of the highest percentage of lawmakers who have added their signatures to the pledge.  Since 1992, the state has approved 42 tax cuts to its three major revenue sources--personal and corporate income, and sales--and eliminated statewide property taxes that accrued to the general fund. 

The result?

Despite right-wing promises that tax cuts prevent job losses and foster economic growth, the state now faces a projected FY2011 budget deficit of $2.6 billion and has suffered the largest job losses of any state in the nation.  In fact, since the current economic recession began in December 2007, Arizona has lost 265,000 jobs, or 9.9 percent of the state's employment.  Even Michigan, with an economy dependent on a shrinking car industry, has not seen those kinds of losses as a percentage of jobs during the recession.  Arizona has some of the highest foreclosure rates in the country, 18.9 percent of the state lacks health insurance and 276,500 Arizona children do not have coverage.  Since 2000, Medicaid rolls have increased exponentially, reaching over 1.3 million in August 2009.

Arizona Fails to Invest in the Future:  Having systematically cut taxes and underfunded education and other long-term social investments for years, the state last year continued to dig a deeper hole by slashing public health, all levels of education, and even temporary health insurance for people with serious medical problems.  Gov. Jan Brewer even approved a proposal to sell Capitol buildings to private firms, which will just cost the state even more in rent payments in the future-- a classic pattern of right-wing state leadership engaging in short-term thinking at the expense of long-term fiscal and economic health.

As PSN has detailed, utilizing progressive tax increases to invest in the building blocks of growth, like education, health care, and transit, leads to higher economic growth in the long-term and is a far better alternative to massive budget cuts.  Grover's picture needs to come down off the wall at the Arizona state capitol.

Resources:
Arizona Daily Star - A needed increase in taxes won't hurt Arizona's economy
Ballot Initiative Strategy Center - Fiscal/Budget Issues
Center for American Progress - State of American Political Ideology, 2009: A National Study of Values and Beliefs 
Center on Budget and Policy Priorities - Recession Continues to Batter State Budgets; State Responses Could Slow Recovery
Pew Center on the States - Beyond California
Progressive States Network - Revenue Options in 2010: Making the Case and Debunking the Myths
Progressive States Network - State Job Creation Strategies Part I: Finding the Money and Investing in Human Capital and Physical Infrastructure