AFP Arizona Describes Pending Tax Deal as a “Mixed Bag”

The Arizona chapter of Americans for Prosperity (AFP Arizona) today described the pending tax and budget deal between Gov. Jan Brewer and the Arizona Legislature as a difficult trade-off, and congratulated members of the legislative majority for their hard work.

“The proposed deal is a mixed bag,” said AFP Arizona director Tom Jenney, adding that “the failure of the Legislature to arrive at a deal might still be the best outcome.”

If the Arizona Legislature can muster the majorities needed to pass a deal outlined last week, it would send a three-year sales tax increase to the ballot this November for voter approval, but would offset that tax hike over five years with the repeal of a state property tax and with reductions to the rates of personal and corporate income taxes.

Under the terms of the proposed deal, the Legislature would also refer to voters in November a temporary spending limit and a reform that would allow legislators to make reductions in areas of the budget that are currently protected from cuts by voter mandates.

Uncertainties surround the proposed deal. The referendum on the sales tax hike, which AFP Arizona calls the “Brewer Tax,” could fail at the ballot—as could the two reform referenda. Further, it is possible that the Governor and a majority of members of the Legislature could rescind the income tax cuts during the 2010 legislative session, if they wanted more revenue.

Observers are also unsure what would happen if the proposed deal fails to achieve the needed legislative majorities for passage.

For AFP Arizona, the best-case scenario would be one in which no tax increases are enacted, the state cannot borrow money to prop up spending, and the state cannot find more than a billion dollars in proceeds from asset sales and sale-leaseback schemes. In that case, the Legislature and Governor could end up having to cut an additional $1.5 billion out of the state’s General Fund budget for the coming fiscal year—for a total reduction in spending of approximately 25 percent off the FY 2009 peak.

The taxpayer group argued that spending reductions on that scale would force the state to eliminate waste in all public services and to make fundamental reforms to Arizona’s inefficient and ineffective K-12 public education system. “The sooner we get started with budget reductions,” Jenney said, “the easier it will be.”

AFP Arizona congratulated conservative stalwarts in the Legislature, such as Senators Ron Gould (R-Mohave County) and Pamela Gorman (R-North/Central Phoenix), and Representatives Andy Biggs (R-Gilbert) and Sam Crump (R-North/Central Phoenix), who have so far held out against the deal.

Other legislators fear that without the proposed deal, Gov. Brewer might be able to assemble an ad hoc majority of Democrats and marginal Republicans to refer to the ballot an even worse tax hike package. Those members have thus concluded that the best alternative is to add fiscally conservative reforms to the package in an attempt to offset the damaging effects of the Governor’s tax proposal.

“Legislative leaders and members of the Republican majority have worked very hard to neutralize the negative impact of the Brewer Tax with pro-growth income and property tax cuts,” Jenney said. Using the details about the deal that were available on Friday, the group rated the proposed deal as being close to a break-even proposition for the purpose of scoring legislators on its 2009 Legislative Scorecard.

AFP Arizona also laid the blame for the session’s prolonged tax and budget debacle squarely at the feet of Gov. Brewer. “Brewer’s insistence on referring a sales tax increase to voters has been a terrible mistake, as a matter of policy, and as a matter of politics,” said Jenney. According to AFP Arizona, Brewer should face the reality that the state needs to reduce baseline spending, and work with the Legislature to correct the wasteful excesses of the Napolitano era.

AFP Arizona also expressed its gratitude to the 14 members of the Arizona Senate who voted on June 22 to refer to the 2010 ballot a reduction in the state’s constitutional spending limit, and expressed its great disappointment that a similar bill was never brought to a floor vote in the House. The proposed reform would reduce the state’s existing constitutional spending limit from 7.41 percent to 6.4 percent of state personal income—low enough to prevent the budgetary excesses in FY 2007 that helped to push the state into its current deficit crisis.

Source: Tom Jenney