The GOP culture of corruption and faith based supply-side ‘trickle down’ economics is destroying Arizona


I warned you that this was coming years ago in The First Rule of Holes Revisited:

Hole[O]ur Tea-Publican legislature passed in a Special Session what was laughingly labeled a “jobs bill” — it was, in fact a corporate welfare tax-giveaway plan. The GOP’s double dose of poison to kill Arizona:

Senate Bill 1001 is filled with tax breaks and incentives for businesses large and small. The legislative budget office estimated its cost at $538 million by 2018 [worsening Arizona’s structural revenue deficit], when all the tax cuts are phased in.

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Brewer’s advisors acknowledged that there is no guarantee the changes would yield enough new investment and jobs to offset the anticipated revenue loss.

La Bruja‘s corporate welfare tax-giveaway plan is being phased in since 2014. Additional tax cuts enacted by our lawless Tea-Publican legislature since 2011 are also being phased in. Their blind faith in supply-side “trickle down” GOP economics is now coming home to roost as these corporate welfare tax-giveaways are digging the structural revenue deficit hole deeper as designed.

The Arizona Capitol Times (subscription required) reports, State pinched by decline in corporate tax revenues:

The state is starting to feel the pinch as corporate income tax revenues tumble down, which budget analysts say is the result of tax cuts being phased in.

The tax cuts were enacted in the middle of the last recession and were meant to better position the state as a business hub once economic recovery starts.

State revenues dipped in December when compared to the year before. Analysts say the culprit is a dramatic decline in corporate income taxes, which dropped by 45.8 percent. They also came in at $30.1 million below budget expectations.

Total collections for the month were 4.8 percent lower than last year, although the actual dollar amount came in at $2.1 million above budget.

The news isn’t surprising. Budget analysts have anticipated a decline in corporate income collections as tax cuts are phased in.

What’s surprising, however, was it took this long to see the drop in corporate income taxes.

“The large decline in the tax category is an indication that the state may finally be experiencing the revenue loss from the corporate tax reductions that began to be phased in on January 1, 2014,” the Joint Legislative Budget Committee said in its report for December.

Budget analysts estimated that corporate tax cuts being phased in over the next three fiscal years, starting in FY2017, would lower the state’s revenue base by $261 million.

Gov. Doug Ducey has promised more tax cuts this year and beyond.

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“It appears the state is now realizing a portion of the revenue loss from the tax reductions,” JLBC said.

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The most worrying part of JLBC’s report is that the state’s core revenue sources – sales and withholding income taxes – showed dismal growth.

Sales tax collections increased by only 1.1 percent, while withholding income taxes dipped to negative 1.1 percent.

Sales tax collections have been consistently less than stellar throughout 2015, although December posted the second lowest for the calendar year. Sales tax collections last June only grew by 0.1 percent.

We have a governor and lawless Tea-Publican legislature who want to eliminate or to “reduce income taxes to as close to zero as possible,” digging the structural revenue deficit hole even deeper, and making the state even more vulnerable to fluctuations in economic cycles by its dependency on sales taxes.

There is currently a bill to reduce the tuition tax credit give-away for corporations, another arterial bleeder of tax revenue that will hemorrhage if it continues to be phased in. As Laurie Roberts of The Republic says, it’s not going to happen with this reckless and fiscally irresponsible Tea-Publican legislature. Push to limit tuition tax credits? Yeah, that’ll happen:

Republican Rep. Doug Coleman wants to call a halt to the insane 20 percent annual increase in corporate tax credits allowed for private school tuition, and slash overhead reimbursements for the groups that collect and dole out the cash.

[House Bill 2063 would slash the 20 percent annual increase in corporate tax-credit donations to 2 percent – something closer to what public schools get to fund inflation. The bill also would cut in half the 10 percent that all STOs can collect to cover overhead.]

The ballooning credits divert tax funds to private student tuition organizations, which in turn offer scholarships to private schools.

In 2007, corporate tax credits siphoned $10 million from the state budget. This year, it’s $51.6 million, according to the Joint Legislative Budget Committee. By 2020, that will rise to $107 million and by 2030, $662.5 million.

“I just believe that when our public system is so underfunded we’re eliminating a choice,” Coleman told the Associated Press. “So I wanted to raise the issue, start the discussion and we’ll see where it goes.”

Where it goes?

I’m guessing right into Sen. Steve Yarbrough’s trash can.

Arizona has perhaps the weakest ethical standards for state legislators in the nation. It allows for ethically challenged and corrupt state legislators like Sen. Steve Yarbrough to get away with lining his own pockets with taxpayer money without running afoul of virtually non-existent ethical standards, because the legislature will not adopt ethical standards with any consequences.

The Chandler Republican is perhaps the Legislature’s biggest supporter of diverting public tax revenues into private-school tuition. In fact, he profits handsomely from the program. He’s the executive director of one of the state’s largest STOs.

In all, Yarbrough’s Arizona Christian School Tuition Organization has siphoned more than $116 million from the state treasury via individual tax-credit donations since 1998, according to the non-profit’s latest IRS filing, covering the 2013-14 school year. By law, STOs get to keep 10 percent of what they raise, to administer the program. In 2013-14, Yarbrough’s ACSTO collected roughly $17 million in tax-credit donations. That’s a sweet $1.7 million for overhead.

Of that, Yarbrough collected nearly $146,000 in compensation, according to the STO’s latest IRS filing.

But wait, there’s more.

ACSTO reported that it also paid an undisclosed amount to HY Processing to handle contributions and scholarship applications. HY is owned by Steven and Linda Yarbrough and their business partners, David and Stacy Harowitz, according to Corporation Commission records. (While he left the dollar figure blank in his 2014 filing, Yarbrough’s STO paid HY Processing $560,710 in 2013 and $426,655 the previous year.)

Yarbrough’s STO also paid $52,000 in rent … to Yarbrough, who owns the building and also rents space to another STO. IRS records indicate School Choice Arizona, an STO that doles out scholarships from corporate tax credits, paid $12,240 in rent to Yarbrough, who sits on that STO’s board.

Look for Yarbrough and probably most Republicans to oppose Coleman’s bill.

I keep being told by advocates of Prop. 123 that we have to vote for it because it is the only way to get education funding in the classrooms immediately. They are trying to sell it on short-term gains while ignoring the long-term consequences of Prop. 123, one of which is the “triggers” that would allow our lawless Tea-Publican legislature to renege on the inflation adjustment funding in the event of an economic downturn, or if state funding for education reaches 49% of the general revenue budget. That makes the promise of Prop. 123 an illusory promise.

Is anyone paying attention to what is going in the global economy right now? A recession is almost certainly on the horizon in the near future. Is the stock market telling us we’re headed for a recession?; Are We Headed For Another Recession? | FiveThirtyEight.

And with the structural revenue deficit built into Arizona’s budget by more than 20 years of unrelenting GOP tax cuts — which become “permanent” because they cannot be reversed under the current partisan makeup of the legislature and Prop. 108, the “Two-Thirds for Taxes” Amendment (1992) — there will be more GOP budget cuts to balance the budget as tax revenues decline, and education funding will soon enough reach that 49% trigger in Prop. 123, cutting off any more funding well before it is set to expire in 2026.

This is all by ideological design. It is purposefully malicious, reckless and fiscally irresponsible by an anti-government, anti-education Tea-Publican Party.

It is better to leave Prop. 301  (2000) in place and to vote these lawless Tea-Publicans out of office in November. It is past time to reverse Arizona’s slide into the abyss from the GOP culture of corruption in Arizona.


  1. Economic analysis at the state level and federsl level are two different animals. Supplyside economics was an overwhwlming success at the federal level. At the state level, for seventeen years, 1992 to 2008 we defeated Texas every single month. Since then Texas has soared and Arizona hasnt added a single job. What happened in 2008? Everify. Everify created the specter that a businessman in arizona could lose evrrything if he or she made a mistake, a common mistake. Investment in at risk Arizona businesses plunged.
    All The other border states without everify, even states with poor economic polices, have moved relative to arizona.

    This analysis is confounded by texas oil, but now thats gone and we shall see. It is also confounded by the incredible over investment in housing that took place in az that is only now, six years later, being soaked up. Finally, we have the intel plsnt, a 5 billion dollar investment that wasfirst injected and then left vacant.
    We were very close to the sweet spot. With sb1070, we established three simple rules. If you drive drunk you will be deported, if you steal a car you will be deported and if you are suspected of murder, you will be deported. DUI deaths of hispanic children dropped by half, 35 per year (child fstality report) – stunning . Auto thfts dropped by half, 25000 per year -stunning. Az murders dropped from over 400 to less than 200- stunning.
    In ou schools, the four hour block resulted in the highest reclassification rate in the nation for English language learners- over 80 percent in four years. The typical rate for other states is 6 percent per year. Like sb1070, this program is under constant assault and will soon be gone.

    • John, supply side voodoo economics has been discredited for decades now. You look foolish peddling this garbage.

      Here’s the story from the horse’s mouth, David Stockman, in a famous story published in the Atlantic.
      “The hard part of the supply-side tax cut is dropping the top rate from 70 to 50 percent—the rest of it is a secondary matter,” Stockman explained. “The original argument was that the top bracket was too high, and that’s having the most devastating effect on the economy. Then, the general argument was that, in order to make this palatable as a political matter, you had to bring down all the brackets. But, I mean, Kemp-Roth was always a Trojan horse to bring down the top rate.”

      A Trojan horse? This seemed a cynical concession for Stockman to make in private conversation while the Reagan Administration was still selling the supply-side doctrine to Congress. Yet he was conceding what the liberal Keynesian critics had argued from the outset—the supply-side theory was not a new economic theory at all but only new language and argument to conceal a hoary old Republican doctrine: give the tax cuts to the top brackets, the wealthiest individuals and largest enterprises, and let the good effects “trickle down” through the economy to reach everyone else. Yes, Stockman conceded, when one stripped away the new rhetoric emphasizing across-the-board cuts, the supply-side theory was really new clothes for the unpopular doctrine of the old Republican orthodoxy. “It’s kind of hard to sell ‘trickle down,'” he explained, “so the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.”
      He’s saying supply side was a story they made up to convince the American people to go along with a scam to pay off rich folks

      You’re not supposed to be a grown up man in 2016 and still believe in fairy tales. Stockman admitted the fraud in the Atlantic article in 1981.

      Reagan created a system for the transfer of wealth from people who actually get up and go to work to a handful of people who add no value to the country.

      “None of us really understands what’s going on with all these numbers.”
      —David Stockman

    • Wow, this is some truly insane raving. And to think that you were actually elected to office. I’m so glad this blog took you down.

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