Analysis finds job losses will result from near doubling of individual income tax rate, 40,000 small business filers targeted
PHOENIX (August 23, 2018) – A new analysis by economist Jim Rounds on an initiative to double the individual income tax rate should alarm anyone who is concerned about the future of small business in Arizona.
According to Rounds’ analysis, up to 40,000 small business filers could be hit with the big tax increase, slowing future business formation, costing up to 100,000 jobs, and depressing tax collections by $1 billion-$3 billion by year 10 of its implementation.
“The proponents of the income tax increase are engaging in false advertising when they say their plan just affects the wealthy,” Arizona Chamber of Commerce & Industry President and CEO Glenn Hamer said. “This analysis shows that by far it’s small businesses that will be saddled with this doubling of the income tax rate, which is bad news for the future of the Arizona economy.”
Rounds, who was previously the senior economist and senior budget analyst for the nonpartisan Joint Legislative Budget Committee, found that small business will be harmed in the following ways if the initiative becomes law:
- The near doubling of individual income taxes for certain tax brackets will directly impact a significant portion of the small businesses in the state since the owners pay the individual income tax and not the corporate income tax.
- The initiative will also result in economic losses that will disproportionately impact the smaller, local market operations that provide support to the larger corporations and their employees.
- To add insult to injury, the initiative will make it difficult for business owners to reinvest and expand their own companies.
“If this initiative passes, there will be thousands of small businesses in Arizona paying a state income tax rate nearly sixty percent higher than Fortune 500 companies. It’s stunning,” Hamer said. “The initiative makes entrepreneurs enemy number 1, and it will make the state openly hostile to small business job creators.”
The 40,000 small business filers that are impacted by the tax hike produce nearly 90 percent of all small business taxable income, revenues that help fund core government functions.
“The risk to the state were this tax hike to pass is dramatic,” Hamer said. “It stands to cost the state a billion dollars in lost tax revenue after a decade. If small businesses are the spine of Arizona’s economy, this breaks our back.”
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