Pro Tip: You can’t analyze taxes in Arizona without discussing Prop. 108 (1992)

Earlier this year, each  of the editorial board pundits of The Arizona Republic pontificated that Arizona needs to close “tax loopholes” — shorthand for tax exemptions and tax credits — and to raise tax revenues to close Arizona’s budget deficit, which is the result of a structural revenue deficit due to years of tax cuts.

Today, Tim Steller of the Arizona Daily Star joins in their analysis. Steller: Arizona could raise revenue, cut less. Steller blames it all on “politics.”

8011098.gif~c200What is entirely missing from the political punditocracy’s analysis of Arizona’s budget deficit and structural revenue deficit is any mention of what lies at the heart of the problem: Proposition 108 (1992), the “Two-Thirds for Taxes” Amendment, Arizona Constitution Article 9, Section 22. It’s almost as if there is an editorial prohibition against any reporter or pundit mentioning Prop. 108 in their reporting.

I consider Prop. 108 the GOP’s “weapon of mass destruction.” Here is why: it only takes a simple majority vote of the legislature to approve cuts to tax rates, or to enact tax exemptions and tax credits (tax expenditures). But these tax revenue reducers become permanent in practical reality because Prop. 108 requires a two-thirds super-majority vote in both chambers of the legislature to increase tax rates, or to reduce or eliminate any tax exemption or tax credit.

Since Prop. 108 was enacted by voters in 1992, the Arizona legislature has not increased tax rates, and has not closed “tax loopholes” as all the pundits decry that we desperately need to do. A tyranny of a minority of anti-tax zealots in the Arizona legislature are empowered to prevent any such tax reforms: 11 members in the Senate, or 21 members in the House.

This is how the anti-government, anti-public education, anti-tax GOP game is played: in each legislature since Prop. 108 was enacted, the legislature has enacted tax rate cuts and/or special interest tax exemptions and tax credits. This has had the intended effect of reducing tax revenues, creating a structural revenue deficit which results in a budget deficit. Because raising tax revenues is always off the table in the ideological GOP, the legislature takes out its meat axe and cuts the budget to essential state services like public education, health care and infrastructure (primarily roads).

The Arizona GOP can manufacture a perpetual budget crisis in Arizona by a simple majority vote for yet another one of their faith based supply-side “trickle down” tax cuts that have not magically produced the unicorns and rainbows they  promised us. And because a tyranny of a minority of anti-tax zealots can prevent any reversal of these tax policies, Prop. 108 thus becomes a “weapon of mass destruction” of Arizona’s government, and of sound public policy.

[NOTE: Prop. 108 is the jurisdictional basis for the lawsuit by Tea-Publicans in the Arizona legislature challenging Gov. Jan Brewer’s Medicaid (AHCCCS) expansion plan. Without Prop. 108, there would be no lawsuit. I predict that the Arizona Supreme Court eventually will void the expansion plan based upon Prop. 108 — unless it is repealed before a final decision is rendered.]

So here’s a pro tip to the media villagers and pundits who keep insisting that we can raise tax revenues and close “tax loopholes” as if this is a realistic possibility in Arizona: you cannot analyze taxes in Arizona without discussing Proposition 108 (1992), the “Two-Thirds for Taxes” Amendment, Arizona Constitution Article 9, Section 22, and calling for its repeal. Because that is the necessary prerequisite to any serious discussion about tax reform, and bringing an end to Arizona’s structural revenue deficit and manufactured budget crises.

When you fail to include any discussion of Prop. 108 in your tax analysis, you are miserably failing to inform the public as to the source of the problem.

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