Real Estate Blog

Arizona an Example for Florida ?

May 17th, 2010 9:57 AM by Sherry Lee

Review and Outlook May 17, 2010 Wall Street Journal:

Arizona is ground zero for the immigration debate, but tomorrow the state's voters will also send a signal on taxes. They'll cast judgment on Republican Governor Jan Brewer's proposal to raise the state sales tax to 6.6% from 5.6% (not counting local tax add-ons) for three years in order to raise $1 billion more a year to reduce a $3 billion budget deficit.

Ms. Brewer has rallied the usual suspects behind her, including the teachers and other public employee unions, hospitals, government contractors, and even the local chambers of commerce. Any group that receives its financial sustenance from government is all in, and they've ponied up close to $2 million to scare the public into believing that a no vote means doomsday for schools, public safety and health, and, well, you've heard it all before. Opponents have spent very little.

The pro-tax deluge highlights why so many states and cities are bankrupt. The interests in state capitals that live off tax revenue have gained inordinate political power over the diffuse interests of taxpayers. The average Arizona family will pay $400 a year more if the sales tax increase prevails, which is a lot when you consider that President Obama's "making work pay" tax credit is limited to $400 for individuals.

Taxpayer groups rightly object that the tax hike comes with no spending restraints. Arizona got into this crisis because during the boom years—2003 to 2007—then-Governor Janet Napolitano, a Democrat, and Republicans in the legislature let spending climb by more than 100% to $10 billion from $6.6 billion.

The Goldwater Institute, a local think tank, notes that the state school system employs one non-teacher for every teacher who works in a classroom. The current moment would seem ideal to rethink how government works, cut the bureaucracy and adjust public pensions, rather than laying off teachers. But the unions won't hear it.

Last year we supported an Arizona tax reform that would have traded a sales tax hike for reductions in personal and corporate tax rates, but that lost due to two short-sighted GOP holdouts. Now the state may get the higher sales tax in return for nothing. Let's hope Arizona voters say no and force the political class to adjust its spending habits to the new reality of slower revenue growth.

Posted in:General
Posted by Sherry Lee on May 17th, 2010 9:57 AM



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