Arizona Gov. Doug Ducey (R) is proposing another round of income tax relief for state taxpayers, after having reduced the state’s tax burden in April 2015.
In 2015, the state ran a budget surplus of $1.2 billion.
Arizona lawmakers are debating how to use the surplus money. Lawmakers are considering, among other proposals, putting the funds away in the state’s “rainy day fund,” increasing funding of government agencies, or paying off public debt.
Michael Hunter, vice president of state and fiscal affairs at the Goldwater Institute, a public-policy think tank, says both sides of the government ledger, taxes and spending, need reform, because the government is taking too much money from taxpayers.
“Budgets are not just about spending,” Hunter said. “They are just as much about revenues, about how much government intends to extract from the economy to support necessary governmental purposes.”
Hunter says good budget plans create good budget results.
“Budgets, in reality, are plans based on projections,” Hunter said. “Projected surpluses, like projected revenues and expenditures, become ‘actuals’ at some point in the future. In the meantime, policymakers and appropriators have to determine the appropriate balance between revenues and expenditures that maximize the overall health of the state, as defined by a majority of those the electorate delegates to make such determinations.”
‘Glide-Path to Zero’
Boaz Witbeck, a policy analyst with the Arizona chapter of Americans for Prosperity, says the state government should use the surplus to increase Arizona’s economic competitiveness by cutting taxes.
“A lot of this is one-time money, so we don’t necessarily want to use a big portion of that for long-term things,” Witbeck said. “One of the ideal things, going forward, is eliminating the income tax, having a glide-path to zero. That’s not going to happen this year or even in two years, but we are hoping for a five-year plan towards that.”
Reducing the income tax is a worthwhile goal, Witbeck says.
“That is one thing we want to do to be competitive … with states that have no income tax, like Texas and Florida and other competitors,” Witbeck said. “We want to make sure we’re offering a good tax and regulatory climate, so we can be in a strong competitive position, economically.
“There’s just a big deadweight loss with the income tax,” Witbeck said. “It’s a very inefficient tax to collect.”
Dustin Siggins ([email protected]) writes from Washington, DC.
Stephen Slivinski, “Paths to Reform: A Policy Roadmap to Elimination of the Arizona Income Tax,” Arizona State University: https://www.heartland.org/policy-documents/paths-reform-policy-roadmap-elimination-arizona-income-tax/