Bitter Budget Battle Underway In The AZ Legislature

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To reiterate what I posted the other day, the budget “is a deal brokered in secret among just Republicans, and sprung upon the legislature at the last minute without committee hearings or any public input or debate. The goal is to ram it through, jam it through the legislature with just Republican votes to pass the budget with this radical “flat tax” add on before declaring sine die on this year’s legislative session. This is Arizona GQP authoritarianism writ large.”

Elvia Diaz writes at The Republic, Ram through a massive tax break for the rich at the last minute? That’s so Arizona:

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Arizona Gov. Doug Ducey started ramming through the Legislature a budget proposal to cut $1.5 billion in tax collections – a huge gift for his rich pals.

That’s typical of the Republican governor, but it doesn’t make it right or any better for Arizonans.

On Monday, Ducey and Republican lawmakers unveiled the details of the proposed 2021-22 budget plan that includes a flat 2.5% tax on income phased in over the next two years. It largely benefits the wealthy and circumvents the will of voters.

At first glance, cutting the income tax rate may sound great. After all, most of us want to keep more of our hard-earned dollars instead of giving it to the government, right?

But hold on.

Shut out others, pass it quickly. How typical

Ducey’s plan, which state lawmakers introduced on Monday, outlines the tax cut structure with rates that range from 2.59% to as high as 4.5%.

Based on what we know so far, individuals earning above $250,000 and married couples reporting $500,000 or more would essentially be paying what they would have before voters passed Proposition 208, which increases education funding via an income-tax surcharge on the rich.

“Our budget protects small businesses from a massive 77.7% tax increase ⁠– protecting jobs, opportunity & prosperity #ForArizonans,” Ducey boasted on Twitter.

The governor apparently struck that deal with Republican leaders with no input from Democrats – another typical move.

“It includes the flat tax detrimental for cities and towns, education, and safety net programs,” Democratic Rep. Raquel Terán tweeted. “IF YOU PLAN TO TESTIFY you must be at the Capitol in person, NO remote testimony will be allowed.”

How typical to shut Arizonans out of the process.  Senate and House Republicans are expected to move quickly to consider the complex spending plan.

Will Sen. Boyer put the brakes on this scheme?

It’s typical of Ducey and his Republican minions to rush through the annual budget. Their goal seems to work every time – keep Arizonans out until it’s too late for them to speak up knowledgeably.

This year is no different. Democrats in both chambers will huff and puff, but they don’t have enough votes to stop the Republican majority.

It’ll be up to at least one Republican in each chamber to come his or her senses, ask tough questions and force a thoughtful debate about the merits of changing the tax code so significantly – just to benefit the wealthy.

Republican Sen. Paul Boyer of Glendale

Republican Rep. David Cook of Globe has raised some concerns, which is good.

All eyes, though, will be on Republican Sen. Paul Boyer of Glendale, who has previously shown he has the guts to stand up to GOP leadership. He has questioned the governor’s revenue projections and said he won’t approve a plan that could adversely affect cities.

Arizonans need Boyer to be that courageous senator who can put the brakes on this massive tax cut.

Arizona voters already spoke up when they supported Proposition 208. It is not right for Ducey and Republicans to go around them just to protect the rich.

But wait! There are more evil provisions hidden in this GQP budget which are not germaine to the budget.

Howard Fisher adds, Some in Ducey’s GOP question his tax plan:

The governor’s bid to permanently cut $1.5 billion a year of state revenues is based on an economic theory and a set of numbers that some lawmakers say don’t hold up under close examination.

And Arizona cities stand to lose hundreds of millions of dollars if the governor is wrong.

The way Gov. Doug Ducey figures it, enacting what he bills as “the largest tax cut in Arizona history’’ will provide an economic stimulus that will keep Arizona competitive in landing new companies and getting firms to expand here, said his press aide, C.J. Karamargin.

And Daniel Scarpinato, Ducey’s chief of staff, said the situation here is different than when Kansas tried this a decade ago, only to find its economy in a shambles.

Note: Both Daniel Scarpinato and C.J. Karamargin used to be political reporters for the Arizona Daily Star, before crossing over to the dark side and becoming flaks for Republican politicians. Neither one knows jack diddly squat about economics, so why is Howard asking them for their opinions? They are just parroting the talking points from Americans For Prosperity, a right-wing political advocacy group founded by billionaire brothers David and Charles Koch, the owners of Koch Industries – who hired Doug Ducey to run their Southwest subsidiary formerly known as the state of Arizona. (David Koch since died in 2019).

Large online retailers like Amazon and Walmart are collecting and paying sales taxes on what is sold online directly to customers.

Until last year, those revenues were included in regular sales tax proceeds.

It is only now that state tax collectors lump these into a special category, cash the governor considers “new’’ money.

That accounting has raised concerns.

“Some of those companies were paying tax already under a different Department of Revenue code,’’ said Rep. David Cook, R-Globe. All the 2019 law did is create a new code.

“They took the money that was already being paid and the new money, comingled it under a new code so it appears that there’s all this new revenue,’’ he said. “But, in fact, all of that is not new revenue.’’

There are bigger issues.

Sen. Paul Boyer, R-Glendale, said he is not buying the numbers the governor uses to justify a permanent $1.5 billion cut in state taxes. He said he is not prepared to approve any plan that leaves cities, which currently are entitled to a share of state income tax collections, in financial trouble.

He is not alone in his questions about how this kind of tax cut will leave the state better off financially.

“I have not seen the information and the data to know that it works,’’ said Cook.

* * *

Ducey’s tax proposal contains an absolute cap of 4.5% on anyone’s income.

From invest in Ed Facebook

This is designed to help those who are affected by voter approval of Proposition 208 in 2020. It imposes a 3.5% income tax surcharge on earnings above $250,000 for individuals and $500,000 for couples to help raise up to $940 million a year for public education.

Technically speaking, that law can’t be voided by the Legislature because it was voter approved. [i.e., The Voter Protection Act]. But putting in a 4.5% overall cap effectively means those high-income individuals will be paying just 1% on everything else, with the state using $370 million of other cash [subsidizing the wealthy] to make up the difference.

“So what you’re saying is, all the taxpayers are paying taxes to the state for the services they provide,’’ Cook said. “But we’re going to take all the taxpayer money, backfill a certain portion of higher earners’ tax bills? How’s that fair?”

Combine that with the revenue losses from Ducey’s flat tax plan and you get the $1.5 billion reduction in state revenues.

Hit to cities

That’s important to cities because of a 1972 state constitutional amendment in which cities gave up the right to levy their own income and excise taxes. In exchange, they are supposed to get a share of state income tax dollars [revenue sharing].

That share is currently 15% of the take, money Boyer said communities use to fund police, fire and other vital services.

On paper, economist Jim Rounds, hired by the League of Arizona Cities and Towns, said a $1.5 billion cut in what the state takes in translates to $230 million less for cities. He said the state would have to alter its revenue sharing formula to 20.6% to keep cities financially whole.

[R]ounds said he did in fact do the calculations that Ducey flak C.J. Karamargin said were being ignored, factoring in the positive effects of the governor’s proposed new 4.5% overall cap. And even then, he said, cities still end up as financial losers unless revenue sharing is increased to at least 17%.

Karamargin, after touting Rounds’ earlier study on Proposition 208, said he could not dispute his latest conclusion about the effect of the flat tax.

“I’m not here to get into a back-and-forth with an economist,’’ he said.

No kidding. This flak doesn’t know jack diddly squat about economics. “I’m here to ‘catapult the propaganda,‘ as George W. Bush used to say, by parroting the talking points from Americans For Prosperity.” Was it really worth selling your soul, C.J?

Immediate needs

The concerns go beyond the impact on the cities. Both Boyer and Cook say if the state really has all that extra money, there are immediate needs.

Their concerns need to be taken into account by Ducey: Republicans have just a one-vote margin in both the House and the Senate. And since no Democrat is expected to vote for this plan, the loss of either’s vote dooms the package.

The questions also go beyond the reliability of the revenue projections and the claim that the economic stimulus of the tax cuts will be offset.

“We have $900 million in pension liability debt,’’ Boyer said. And that’s just for the retirement system for police and firefighters.

Then there’s the fact that the state Governor Jan Brewer sold off several buildings, including the House, the Senate and the Executive Tower during the last big downturn a decade ago to generate immediate cash.

That deal allows the state to continue to lease them back with an option to buy. Boyer said the state still owes $430 million on them.

There’s also a budget maneuver in which the state borrowed money from public schools by moving payments from one fiscal year into the next. That’s $930 million in debt being carried on the books.

“I really think it’s prudent to, with all this temporary money that’s floating around, to use that one-time money to pay off our debt, then focus on targeted investments, and then talk about targeted tax reform,’’ Boyer said.

Cook agreed. He said the only reason Arizona has $1 billion in its “rainy-day fund’’ is because it put off for years making necessary repairs to state buildings.

Senate President Karen Fann, who is giving Donald Trump an assist to rig the next election, is also trying to rig the Senate Appropriations Committee vote on Governor Ducey’s bogus budget.

Late breaking:

The GQP Queen of voter suppression, Michelle Ugenti Rita, may be another vote against Ducey’s budget because she is an anti-masker, along with Rep. Joseph Chaplik (R-LD 23). “Save the fetus! Survival of the fittest when they are children!”

Developing: Education groups are prepared to go to the ballot with a referendum if Gov. Doug Ducey’s flat tax gets legislative approval with the budget this year. Stay tuned.





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