Tax increases should be considered the very last, desperate alternative to solve the state’s fiscal problems. While spending cuts are made very visible by interest groups that have grown dependent on government programs, the average taxpayer suffers less visibly when government raises taxes to support those interest groups.
But suffer they do. The Goldwater Institute commissioned economic modeling of possible $1 billion tax increases. According to the Beacon Hill Institute at Suffolk University in Boston, a sales tax increase would cost the average Arizona household $300 in after-tax income — more than a week’s worth of groceries. Over 14,000 jobs would be lost, about the same number as work for every McDonald’s and Circle K in Arizona combined.
If you think the effects of a sales tax increase would be bad, an income or property tax hike would be even worse. They directly tax jobs and business investment. A $1 billion income tax increase would cost 26,000 jobs. A $250 million state property tax would eliminate $189 million of investment in business property as well as 3,700 jobs.
The Goldwater Institute has proposed a host of ways to reduce the budget for this year and systemic changes that will solve our budget troubles over the long term. Until every spending angle has been examined, tax increases shouldn’t be considered.
Byron Schlomach, Ph.D.