Republican Arguments that Increased Sales Tax Receipts Will Make Up for Lost Income Tax Revenue is Very Regressive and Overly Optimistic

In their latest attempt to justify their flat tax proposals, Republicans at the State Legislature and the Governors office said that there is no reason to worry about local governments or other vital budget areas losing valuable sources of revenue.

Why?

Because the increased sales tax receipts from online gambling, internet sales (through the Way Fair decision), and legalized marijuana purchases will offset the income tax reductions once the flat tax system goes fully into place in three years.

YSR 5-19-21 (1)

In essence, what Republicans are saying is they are creating a regressive trickle-down flat tax system where the lower and middle classes shoulder more of the tax burden than the wealthy.

Remember this is the same Republican economic philosophy that has repeatedly maintained the snake oil belief and the economic big lie that trickle-down tax cuts would pay for themselves. Again, this is from the same political party, with its Reagan, Bush II, and Trump tax cuts, fiscal mismanagement, and unpaid wars that had a substantial hand in raising the national debt from one trillion to close to $30 trillion dollars in 40 years.

It took two hundred years (from President Washington to Carter)to get to one trillion dollars. Republican economic stewardship increased it 30 times as much in a fifth of the time.

The League of Arizona Cities and Towns, according to the Yellow Sheet Report, contends, despite the rosy and historically unrealistic projections conveyed by the Arizona Republicans on increased sales tax receipts that cities would “lose 31 percent percent of their current shared state revenue once planned income tax cuts fully take effect.”

Tucson Mayor Regina Romero agrees with the position expressed by the League. She noted that:

“It is a simple question of math – the decrease in state-shared revenue from the flat-tax proposal far exceeds the additional dollars cities and towns, including Tucson, will receive from incoming marijuana and online sales. Plus, marijuana sales can only be used in addition to current budget revenues, and cannot replace revenue per the language of Prop 207. Also, a significant amount of online sales were taxed and collected in Arizona prior to the Way Fair decision, so any additional dollars will be marginal.”

Arizona Legislative District 18 State House Representative and Ways and Means Ranking Committee Member Mitzi Epstein agrees with Romero and the League that the math projections by the Republicans, without any detailed analysis, may be “overly optimistic” about the incoming sales tax receipts from online gambling, internet sales, and legalized marijuana purchases.

She also feels that the regressive direction of the state tax code should this pass as proposed is “unfair, irresponsible, and horribly regressive.”

If history is a guide (think the national debt and other states that tried this like Kansas,) then the optimistic Republican revenue projections for increased sales tax receipts will undoubtedly prove erroneous.

In a state legislative system where it will be impossible to get a two-thirds majority to pass a tax increase to compensate for the likely Republican economic misjudgment and mismanagement, it is vital for the people to contact their legislators and tell them not to take the state off the fiscal cliff. If they do not, the people in this state may face a doomsday economic scenario where priorities like public schools, children’s health care, food stamps, infrastructure, and public safety face the budget axe when it is time to balance the government ledger.