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The Problem with Arizona's Sales Tax Hike

by John Stephenson / /

“How much is enough?” I have been asking myself this question a lot lately, especially when I think about Arizona and Proposition 100, its proposed sales tax hike. 
 
Proposition 100 is a ballot measure that, if approved, will raise the state’s general sales tax 18 percent. Voters will go to the polls on May 18th, but early voting begins this week. Prop 100 is supported by a coalition headed by Republican Governor Jan Brewer. The Governor and her allies claim that the state is facing one of its worst budget shortfalls in memory, and the state will have to implement draconian budget cuts unless the voters approve an increase in the state sales tax. 
 
However, the Goldwater Institute (GI) reports that, instead of alleviating the budget problem, the sales tax hike will actually cut the state’s real economic output by $1.2 billion and cost an average of $300 per household. On top of that, Dr. Byron Schlomach, economist and Director of the Center for Economic Prosperity at GI, writes, “[T]hese proposals don’t take into account that the state’s property taxes went up this year, or the electricity tax passed by the Corporation Commission a few years ago.” Dr. Schlomach also notes that Arizona “has lost more than 10 percent of its private employment compared to its peak. State and local governments together have lost less than 6 percent of their workforces."
 
The problem is that Arizona’s state government has grown to an unsustainable level. GI has a great video available here summarizing some programs that, apparently, are at risk of being cut.
My favorite examples include $800,000 for shooting range improvements and $5,000,000 for state lobbyists. Would losing these programs really harm Arizona?
 
But rather than reduce state spending to a more manageable level, the Governor and State Legislature have turned to a large tax increase to finance more government. Unfortunately, if history is any guide, government without real cuts will only continue to grow, requiring further tax increases down the road. However, as Schlomach points out, “The capacity of the private sector to pay higher taxes is at the breaking point.” There will come a time when Arizona's taxes will be too much for taxpayers, from retirees to small businesses, to bear, which will prompt them to leave the state. That will only make matters worse.
 
Let’s hope that the voters of Arizona realize that it’s time to say "Enough!" to their state government.