One Big Ass Shell Game

Cross-posted from RestoreReason.com.

Governor Doug Ducey has pledged to reduce taxes every year he is in office and likes to tout he is doing just that. The GOP-led Legislature also seems to be totally on-board with doing less with less unless that is, they are handing out corporate welfare. At least that is, while they still need corporate donations to help fund their reelection campaigns.

Evidently though, once out of office, GOP “leaders” can see the error of their ways as with former Governor Jan Brewer who just told Capitol Media Services that, in hindsight, the tax cuts she approved were “a little bit too aggressive.” She went on to say that the result has been a reduction in revenues for necessary state services and that “sooner or later, you have to pay the fiddler.” Just like GOP leadership today though (who claim school boards, not they, are responsible for teacher salaries), she passes the buck by saying her approval of the cuts was a political compromise because “the boys at the Legislature…wanted more.”

The tax cuts Brewer and “her boys” put in place a decade ago will in the FY2018 budget year alone for example, reduce state revenues by another $107.2 million. Since 2015, the 30% reduction in the corporate tax rate has amounted to $400 million. Unfortunately though, economist Dennis Hoffman of the W.P. Carey School of Business at ASU says, “There is no discernible evidence that corporate economic activity accelerated in response to the cuts.” He went on to say that “net corporate collections this fiscal year will likely be less than 60 percent of the net flows observed in fiscal year 2012 or 2013 despite the moderate growth we have seen in the overall Arizona economy since then.” Or, as Howard Fischer, of Capitol Media Services writes, “if the cuts were supposed to convince more corporations to move to Arizona and start to pay taxes, that hasn’t been the experience.” Need I mention how Sam Brownback’s Kansas experiment with “trickle down has worked out?”

The tax cuts aren’t though, the only form of corporate welfare GOP lawmakers are really good at handing out. In fiscal year 2016, state law allowed $13.7 billion in taxes to go uncollected via a long list of exemptions, deductions, allowances, exclusions or credits. That number, the AZ Capitol Times reports, is likely to grow by another $1-to–2 billion once individual income tax deductions are added to it. The Arizona Department of Revenue estimates that more than half of all state taxes haven’t been collected for at least a decade. These “tax expenditures,” amount to $136.5 billion since fiscal year 2007, about the same as the sum of state budgets over the past 15 years. Most of these tax expenditures (exemptions) come from a variety of “carve-outs” to the transaction privilege tax, Arizona’s version of a sales tax. In fiscal year 2016 alone, almost $12.3 billion was excluded, about half of it due to services being exempted.

Of course, any attempt to reign in these tax exemptions has been met with resistance from GOP legislators and in fact, an amendment to the AZ Constitution passed by voters in 1992 requires any changes to the tax code that would increase revenue, to be approved by a two-thirds supermajority in each legislative chamber instead of a simple majority. This is a tall order, but even so, Senator Steve Farley (D) and Senator David Farnsworth (R) introduced SB 1144 this year to require a review of tax expenditure to TPT every ten years. Representative Vince Leach (R) was one of the many opposed to the bill, making it clear he didn’t like the word “expenditure” in the name of the review committee (Joint Legislative Tax Expenditure Review Committee) the bill called for. Leach said the name would give the impression that the Legislature is appropriating funding with the exemptions rather than just not collecting it. I would call that a serious splitting of hairs. The bottom line is whether you call them tax exemptions or tax expenditures, the affect is the same…they are making our state poorer and ultimately, due to cut services and programs, meaner.

But wait, there’s more. Not content with all the giveaways they already have in the pipeline, GOP legislators agreed this year, to cut another $10 million from state revenues by allowing Arizonans an additional $100 exemption of their income from state taxes. This is definitely more show than go though, since even the wealthiest Arizonans – those making more than $150,000 a year – will see a difference of just $4.54 when they file their taxes;those making less will see even less.

Of course, there’s nothing like political spin to put a different face on facts. Of the $100 increase in personal exemption, gubernatorial press aide Daniel Scarpinato said, “Any time you’re improving the tax code and letting people keep more of the money they earn, you’re going to see an impact. This is money that people will be keeping of their own and putting into the economy rather than just going into government.” Really? A max of $4.54 per taxpayer will get our economy moving? Why didn’t we think of this before?

The state needs to find the balance of “providing enough revenue to pay for all the other stuff that businesses and the public want to make a nice environment to live in” says economist Jim Rounds. And, although it doesn’t take an economist to figure that out, some voters still may not realize that many of the tax cuts the AZ GOP has handed out aren’t cuts at all for the citizens of Arizona. Rather, they are part of a complex shell game that lets the Governor and legislators look like they are cutting taxes while just shirking their responsibilities to fund our schools, repair our highways, and care for the neediest amongst us. Instead, they increasingly pass the costs down to the taxpayers at the local level in the form of increased sales taxes, overrides and bonds for school districts, and local taxes to repair our roads. In the case of monies for road repair specifically, the revenue for the repairs has been raised year after year, but then also each year, swept up by the Legislature to use elsewhere.

Yes, the funding of our state is one big ass shell game which we are currently losing. Want to start winning? Elect legislators by their commitment to giving Arizonans what they deserve: well funded public schools with adequately compensated teachers, well maintained highways and roads without potholes, a Child Protective Services agency that actually protects children, and much more. Face it, we are effectively in a war between care for the people and their common good and care for corporations and the wealthy. Your vote is your most effective weapon in that war; use it wisely.