The recent Grand Canyon Institute report “The Effects of Tax Reductions In Arizona: Significantly Reduced Government Revenue and No Apparent Impact on Economic Growth,” dismisses the bipartisan efforts to improve Arizona’s tax competitiveness over the past two decades and defies common sense.
Does anyone really believe that Arizona would be better off with significantly higher personal, corporate and business property taxes?
Yes, we need adequate revenues to fund the core areas of state government, including education, health care and criminal justice. But, without a healthy economy this task becomes very difficult. And reform efforts can be more valuable than simply new money.
A quick history lesson:
Former Gov. Symington got the party started with sharp decreases to personal income taxes. Gov. Hull kept it going by insisting those tax cuts continue. And while further reductions in the personal income tax may not have been at the top of her agenda, the fact is that then-Gov. Napolitano signed legislation reducing the personal income tax rate as well as reducing tax rates for business property and research and development.
Gov. Brewer and the architects of the last two major job bills, including Speaker Andy Tobin and former Speaker Kirk Adams, took the matter of tax reform to a new level. We have now put in motion tax reductions to business property – real and personal – capital gains, corporate income, sales factor for manufacturing and service industries, new job creation tax credits, bonus depreciation and even further enhancements to the R&D tax credit.
The evidence is clear that tax rates do matter. The Wall Street Journal recently reported that the nine states with no personal income tax accounted for 62 percent of the three million net new jobs over the past 10 years despite representing just 20 percent of the country’s population.
And Steve Moore and Art Laffer’s recent report, “Rich States, Poor States,” found that Census data consistently shows that people choose where to live, engage in commerce, and invest based on economic competitiveness, driven primarily by low tax rates.
California is a perfect example of why tax rates do matter. We have written about Phil Mickelson and Tiger Woods fleeing or preparing to flee the state due to excessive taxation. They are just two examples of a greater trend of athletes and other wealthy Californians looking to relocate. Could it be that these movers and shakers are looking for better weather? Less crowded beaches? Or simply looking to take their money to states where they can keep more of it?
So what is the bottom line? Arizona is now among the top-10 best states for business according to Chief Executive Magazine. We are in the game when it comes to significant job relocations for high-wage jobs that could go anywhere in the country and oftentimes the world.
Arizona’s economy is adding jobs at one of the fastest clips in the nation. We have been one of the fastest growing areas for population over the past two decades.
While we have made great progress, other states are not standing still.
Noting the success of Texas and Florida’s zero income tax rates, Oklahoma, Kansas and Louisiana are looking to lower or eliminate their income taxes.
Rather than go backwards, let’s continue to make progress on our tax rates and improve Arizona’s ability to create jobs for our people.
Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry