The GOP’s double dose of poison to kill Arizona

Posted by AzBlueMeanie:

On Monday, Governor Grim Reaper called a special session for the purpose of passing a so-called "jobs bill" (a modifed version of Rep. Kirk Adam's corporate welfare tax giveaway plan from last year) secretly negotiated between our lame-duck governor, our de facto governor, Sen. Russell Pearce, and House Speaker Kirk Adams (aka Captain Kool-Aid, a true believer in faith based supply-side "trickle down" GOP economics). The plan is for Republicans to simply rubber-stamp this piece-o-crap without any real debate or any amendments. Gov. Brewer touts bill to reduce business taxes, create jobs:

Gov. Jan Brewer and lawmakers unveiled a wide-ranging package of tax cuts and incentives on Monday that they believe will usher in a new era of economic prosperity.

Using Arizona's 99th birthday as a platform, they said a special legislative session this week will map a new course for Arizona's economy: one that relies more on high-paying, skilled jobs and less on the boom-and-bust cycle of housing growth.

"This is the most historic piece of legislation to be heard by the Legislature in decades," Brewer said at a news conference.

Really? Then why the rush? Why the secret negotiations? Why were Democrats excluded? Shouldn't this bill be subject to a robust public debate and an opportunity to offer amendments? Isn't that what Republicans said about the Affordable Care Act? Even the enablers of these radical Republicans at the Arizona Republic agree. Rush job won't solve state's financial woes. Oh right, I almost forgot, IOKIYAR.

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. "I can't answer the question," said John Arnold, director of the Governor's Office of Strategic Planning and Budgeting.

Still, Arnold and other proponents maintain the moves are necessary to boost the economy.

They said lower tax rates will attract new business investments, making up for the lost revenue.  [Faith based supply-side "trickle down" GOP economics] 

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The bill faces relatively smooth sailing, since it has support of the GOP leadership and Brewer and Republicans have more than enough votes to pass it without Democrats.

A four-year phase-down of the corporate income tax, at a cumulative cost of $220 million, is the biggest-ticket item in the bill.

Arizona is in the middle of the pack on corporate income tax; a 2-percentage-point cut would give it the fifth-lowest rate in the nation.

Beginning Jan. 1, 2014, the 6.968 percent tax would reduce by 0.5 percentage points a year, settling at 4.9 percent in 2018.

Adams said changes to the business personal property tax should spur new investment next year.

The bill proposes to increase the exemption for business equipment purchased in 2012, raising it to $79,000 from $66,000. It would be adjusted annually.

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Most of the tax breaks would not kick in until July 2013, after the temporary, 1-cent-per-dollar sales-tax increase Brewer championed expires.

Ah, the goal here is for this radical Republican legislature to tie the hands of future legislatures with these corporate welfare tax giveaways, because as long as Prop. 108 (two-thirds super-majority requirement for tax matters) remains law, these tax cuts become permanent, worsening Arizona's structural revenue deficit indefinitely into the future.

Which brings us to the second dose of poison moving through the legislature, also designed to worsen Arizona's structural revenue deficit indefinitely into the future. It is the bad government "Taxpayer Bill of Rights" (TABOR) by another name. Arizona lawmakers aim to rein in future state spending:

Gov. Jan Brewer and state lawmakers are making a renewed push to rein in future state spending as legislators grapple with the fourth-straight year of budget deficits.

Lawmakers have introduced a slew of bills to tighten the existing cap on how much money the state is allowed to spend on programs and services each year.

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In Arizona, proponents believe the often-controversial spending-limit measures have a good chance of passage this year given the state's political landscape.

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Brewer is the first governor in at least a decade to propose a new spending limit as part of the executive budget package released last month.

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Critics, including many advocacy groups, Democrats and even some Republicans, fear the efforts could put the state into a fiscal straitjacket that would be impossible to loosen.

They said that new limits aren't needed and that massive tax cuts approved in 2006 are equally to blame for the budget gap.

"This is a solution in search of a problem. It would squeeze everything the state does," said Dana Naimark, president and CEO of the Children's Action Alliance. "To lock ourselves into a formula – it just makes no sense."

[Last week] the Senate Appropriations Committee passed four bills designed to put tighter limits on state spending.

The existing constitutional limit, approved by voters, has been in place since 1980. It said the state cannot spend more than 7 percent of the total personal income of everyone in Arizona.

The actual expenditure figure is slightly higher, 7.41 percent, because the state has since taken on additional obligations, including paying for health care for the poor.

But lawmakers don't feel that ceiling is tight enough. Some of the bills would lower the limit. Others would change the formula under which state spending is calculated.

The bills include:

- SCR 1019: The existing constitutional limit on state spending would be lowered to 6.4 percent of the total personal income of everyone in Arizona.

– SCR 1026: The current constitutional limit on state spending would be eliminated. Beginning in fiscal 2014, a new limit would be set based on a new formula, using expenditures from the year before, adjusted for population and inflation.

The resolution includes provisions under which the spending cap could be temporarily suspended, such as in the case of an emergency, and grants taxpayers the ability to go to court if the Legislature tries to exceed the limit.

- SB 1231: Beginning in fiscal 2013, spending would be capped at the level of expenditures for the previous year, with adjustments for population and inflation.

- SB 1408: Institutes new procedures for lawmakers should they decide to exceed set spending limits. Among other things, they would be required to hold a public hearing and take a roll-call vote.

None of the legislation exactly matches Brewer's proposal.

Her office wants to tie the spending limit to the 10-year average of revenue growth. In years in which there was no revenue growth or shrinking revenue, the number would be capped at a negative 2 percent. The governor's proposal also specifies that any excess funds would be dedicated to paying off the state's debt, deposited into a "rainy day" fund or used for one-time capital projects and tax rebates.

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Five years ago, the debate focused on the so-called Taxpayer Bill of Rights (TABOR).

TABOR, which was enacted in Colorado in 1992, is a constitutional amendment that limits the annual growth using a formula based on population and inflation. [In 2005, voters in Colorado suspended TABOR for five years after massive budget cuts to public services such as education, health care, transportation and roads. TABOR went back into effect in 2010.]

That means, for example, that if the inflation rate is 2 percent and the state's population grows by 1.5 percent, state expenditures can increase only by 3.5 percent. The state must refund the excess revenue to taxpayers.

But critics say its revenue limits give lawmakers no flexibility, especially given that certain groups – including schoolchildren, prisoners and the elderly – grow at far different rates than the general population and that they trigger a large portion of state expenditures.

Jon Shure of the Washington, D.C.-based Center on Budget and Policy Priorities said… "It has a simplistic appeal as a way of shrinking government," said Shure, deputy director of the nonpartisan think tank's State Fiscal Project. "But it severely restricts a state's ability to respond to changing needs. You start fighting amongst yourselves for crumbs of a shrinking pie, and you can't make the pie bigger."

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Senate Minority Leader David Schapira, D-Tempe, is among those who don't think the state needs the limits. State lawmakers do not have a problem with runaway spending, he said.

"If you go back and look at the past 10 years, the budget has grown, but it's not because the Legislature decided to spend money on something. Most of it has been formula growth," Schapira said.

"The idea of out-of-control spending in Arizona state government is a myth."

The combination of these proposals is a Grover Norquist wet dream. The radical Republicans are drowning baby Arizona in the bath tub.

Note: Ezra Klein recommends "A good Brookings paper (pdf) on state budgets." You can bet the GOP leadership has not read it.