Case study in tax rhetoric
Dec. 8, 2002
Arizona has been a case study of what happens when you follow the advice of corporate-funded think tanks like the American Legislative Exchange Council (ALEC), credited by Robert Robb as showing that low taxes increase economic growth ("Theory, schmeory: Don't raise taxes," Wednesday).
Arizona did cut taxes in the mid-1990s, primarily state income taxes, by nearly 30 percent and the state personal property tax was virtually eliminated.
Following the guidance of ALEC that "rainy day" funds not be allowed to get too large, the "rainy day" budget stabilization fund was raided to fund half of these tax cuts.
Tom Rex, the manager of Arizona State University's Center for Business Research, warned as early as 1997 that such reductions in the "rainy day" fund left the state fiscally unstable in even a minor recession.
So what are the results?
We have $800 million less this year in state revenues due to accumulated tax cuts. Comparing Arizona's economic performance from 1993-1995, before most tax cuts, with 1997-2000 after them, employment and earnings growth in Arizona actually worsened.
We now have a state funding mechanism riddled with special interest tax credits and sales tax loopholes that even extend to country club memberships.
Meanwhile Arizona's schools and social services continue to underperform, in large part because we're not willing to invest in them. The one tax most linked to economic growth, the business property tax, wasn't cut.
If we really want to grow smarter in this state, we need to rethink priorities and not rely on simple "tax cuts equal growth" rhetoric that doesn't stand up to scrutiny. - Dave Wells
Tempe
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