G.I’s “study” of family’s cost of Prop 100 is really “just a math equation”

by David Safier

A week ago, when I took my most recent swipe at the Goldwater Institute's ridiculous assertion that a one cent sales tax hike will cost the average family $400, I guessed how G.I. arrived at its $400 figure.

I'm willing to bet [G.I.] took the entire revenue expected from the 1 cent tax hike, divided it by the number of residents in Arizona, then multiplied it by 4 to get your "average family."

Looks like I guessed pretty good.

On Sunday, an article on Prop 100 in the Star had this line.

[A] study conducted for the Goldwater Institute estimated the tax would cost an average of $400 per household.

"A study?" I asked myself. "I'd like to see that."

So I emailed Starlee Rhoades, G.I.'s VP of External Affairs, and asked to see the study. Here is her reply:

It wasn’t a study, it was just a math equation. $918 million (amount the state says the tax will generate) divided by 6.5 million (appx. population according to the Census) is $141. Multiply $141 by 2.64 (avg household size in AZ according to the census) and you get $373. Our initial estimate was done when the sales tax increase was estimated to raise a full $1 billion.

The only difference between my guess and the actual calculation is that G.I. used 2.65 instead of 4 as the size of the average family.

(To be fair, I don't know if G.I. used the term "study" when it talked with the Star, so I won't fault G.I. for calling an equation a study — unless the Star wants to verify the term G.I. used.)

Unbelievable! These are very intelligent people. They know how misleading — I take that back, not misleading, wrong — that simple math equation is. Unfortunately, their integrity doesn't match their intelligence. If it did, they would never have used that figure.

Let me go through this again.

An average family's income is in the $55,000 to $65,000 range. To spend $400 because of a one cent sales tax hike, the family has to spend $40,000 on sales taxed items. That leaves between $15,000 and $25,000 to spend on things like rent/house payments, utilities, food, medical costs, services, other taxes, etc. That's only $1250 to $2000 a month.

Sorry, that's just absurd. And G.I. knows it. But that easily derived $400 figure works so well to promote its anti-Prop 100 propaganda, G.I. decided to drop a few dozen I.Q. points and look no further.

So why is G.I.'s simple math so wrong? Because the actual calculation is far from simple. As a matter of fact, an economist I talked with from the Eller College of Management said he wouldn't attempt to come up with a figure without doing a lot of study.

But let me venture anyway. Arizona families aren't the only ones who pay sales tax. Here's a partial list of non-family sales tax payers.

• Tourists account for about 10% of sales tax dollars.
• Businesses pay sales tax on equipment they buy.
• Builders pay sales tax on their building material and, I've been told, on all their labor as well. The decline in building is one of the major reasons our sales tax revenues have fallen.

Add all those taxes paid by non-families together, along with others I don't know enough to include, and that $918 million figure comes way, way down. Then estimate the percentage of income a poor family, a middle class family and a rich family spend on sales taxed items to figure out how much that mythical average family pays, and things get even trickier.

No matter what the actual figure is, it can't possibly be anywhere near $400 a year for an average Arizona family. My back-of-the-envelope estimate is more like $150 to $200. That comes to about 40 to 50 cents a day.

A FINAL NOTE: The Star didn't present G.I.'s $400 figure as fact. The reporter actually did a little math using IRS tables and came up with something closer to $200.

But the reporter did the readers a disservice by saying G.I. conducted a "study." Based on G.I.'s track record for telling the truth, wouldn't it make sense for the reporter to ask to see the study? When will the media realize that G.I. is selling conservative snake oil and has no scruples about misrepresenting an issue or using an inflated number to make a point?