The GOP Legislature Deceives Us with Tax Cuts

“Those who cannot remember the past are condemned to repeat it,” said George Santayana.

He must have been talking about Arizona’s so-called middle-class tax cuts. Or the famous Republican trickle-down economic theory that tax cuts for the wealthy and corporations would inevitably “trickle-down” to workers. On the contrary, there is ample evidence showing that wealth has accumulated at the top while worker wages have barely budged for decades.

With the help of the Republican-led State Legislature, Governor Ducey just passed an Arizona budget with a $1.3 billion tax cut, which is set to rise to $1.9 billion, mainly to the benefit of Arizona’s most wealthy.

The governor said in a prepared statement, “Arizona taxpayers, no matter their income, will experience a tax cut under our historic tax reform.” Unfortunately, the governor did not say that about 53% of the tax relief will go to the 9,645 Arizonans with a taxable income of more than $1 million.

Slim pickings for middle class

Only about 1% of tax relief is available for people who have taxable earnings of $50,000 or less. For those earning $20,000 to $25,000, for example, the average tax cut would be $3, rising to $5. Unfortunately, this tax will be phased in over three years resulting in a flat tax of 2.5%.

This writer, whose state effective tax rate is 2.6%, will have to wait three years to take advantage of the flat tax rate of 2.5%, saving me .1% on my State Income taxes or around $12 a year.

In researching this article, I found that from 1992 to 2015, there were seven state income tax cuts, with Governors Napolitano, Brewer, and Ducey all cutting taxes. If cutting taxes puts more money in people's pockets, why haven't the tax cuts worked for the middle class?

In a lengthy study, the Brookings Institute said about the Effects of Income Tax Changes on Economic Growth.

• We find that, while there is no doubt that tax policy can influence economic choices, it is by no means obvious that tax rate cuts will ultimately lead to a larger economy.
• The argument that income tax cuts raise growth is repeated so often that it is sometimes taken as gospel. However, the net effect of the tax cuts on growth is uncertain and depends on both the structure of the tax cut itself and the strength of state budgets that show a budget surplus.
• The cutting of taxes should not be considered unless a surplus of income is assured for the next fiscal year.

This last point about not cutting taxes unless a surplus of income is assured should be read by all Republican legislators. They think that by Arizona getting $5 billion in federal COVID aid for schools this year, this somehow creates a budget surplus -- which equals tax cuts.

Kansas tax cut disaster

Tax cuts have been tried multiple times in federal and state budgets, but none seem to fulfill their promise to stimulate the economy and bring tax relief to the middle class. For example, Republican Kansas Governor Sam Brownback tried tax cuts in 2012 with disastrous effects on Kansas residents and the Republican legislature. Facing a budget shortfall of more than $1 billion, the Republican legislature overwhelmingly voted to roll back Brownback's tax cuts.

If Governor Ducey wants to reduce the tax burden, he should lower the regressive tax burden for Arizona's poor and middle class. According to the Institute on Taxation and Economic Policy, and using the seven tax brackets for taxpayers and listing what each bracket of who pays should not be hard to figure out that regressive taxes on the poor and middle class are what tax relief for the 99% of us should look like.

The four most regressive Arizona taxes are:

State and Local Taxes. The top 1% pays 5.9% of income while the lowest 20% pays 13% of income

Sales and Excise Taxes. The top 1% pays 1.1% of income, while the lowest 20% pays 8.1% of income.

Property Taxes. The top 1% pays 1.7% of income, while the lowest 20% pays 4.5% of income.

Personnel Income Tax. The top 1% pays 3% of income while the lowest 20% pays 0.3%.

It shouldn't be hard to understand middle and lower earners are paying more of their income on regressive taxes. For example, on Personnel Income Taxes with the lowest 20% just paying 0.3% compared to the top-paying 3%, shows that low-earning taxpayers don't need or benefit from an income tax cut.

It was of no great surprise when going over files that I have saved over the past ten years that not one economist said that tax cuts benefit the middle class or that tax cuts are good for the economy. And no Republican politician will admit that tax cuts are good for the 1%.

An economist whom I met who worked for the Federal Reserve Board in Washington, D.C., explained tax policy and economics theory this way: "Anything to do with taxes and monetary policy is too important to be left to politicians, and tax cuts to spur the economy for middle class never work."