For those looking for proof that tax policy matters in the highly mobile United States, look no further than today’s Wall Street Journal report on the NYSE threatening to leave New Jersey as a result of that state’s mere consideration of a tax on stock trades.
The NYSE, according to the report, will make a test run in moving some of its electronic trading operation to Chicago where such a tax is not being considered.
Arizona can take a lesson from all this. Our state is in a national and increasingly global competition for business. The most important tax in terms of determining where people and most businesses locate is the top individual income tax rate. The proof is overwhelming.
The fastest growing states continue to be those with low or no income taxes. States like Florida, Texas, and Tennessee are booming and have no personal income tax. Arizona has also done well with a competitive income tax rate and low taxes in other areas, such as residential real estate.
Since most businesses pay their taxes under this part of the tax code, it’s not just humans that move to these states, it’s businesses. And good businesses, too. The entrepreneurial homegrown types that have roots and invest heavily in their community offerings like nonprofits, cultural attractions and the arts.
The WSJ story notes that New Jersey is one of the country’s high-tax budget basket cases. Contrast this with Arizona, which entered the uncertain economic times brought on by the pandemic with a $1 billion rainy day fund and surplus all while making record increased investments in K-12 education. Those education investments, which included an average statewide teacher pay increase of 20% (which the Arizona Chamber and broader business community supported), were made possible because of a healthy economy.
That’s all at risk this November, though. Proposition 208 would end Arizona’s long run as a state with a favorable tax climate. Overnight the state’s top income tax rate would skyrocket by 77.7%!
Arizona’s reputation as a state friendly and welcoming to small businesses and entrepreneurs has been built up over a quarter of a century and has been improved on by governors and legislators of both parties.
Let’s not ruin it. Vote no on 208.
Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce & Industry