Jason-Here are the talking points I told you about. Remember, don't let anyone get you off the message you want to communicate: the "Taxpayer Protection Act" is the most effective social welfare program Arizona can ever pass--and it takes tax policy out of the hands of the special interests and gives it back to the people.-Jeff
CATCHING THE WAVE SWEEPING ACROSS THE NATION
While Arizona's employment rate is low and the economy is srong, things could be much better. Many people who have jobs have low-paying service sector jobs. Arizona ranks near the bottom of the states in annual per capita income. About half of all jobs held by Arizonans are in the bottom third of industries ranked by average annual pay, according to economist Debra Roubik. 16% of all high-paying jobs in Arizona are high-tech manufacturing jobs, and 14% are in high-tech services. These are the jobs being created by the "new economy." These are the jobs in the sector of the economy with the greatest promise for the future.
A study for the Arizona Association of Industries by Deborah Roubik of VisionEcon , published in January 2000, and cited in the Arizona Business Gazette and other publications, verified findings suggested by the classic work of Timothy Bartik in 1991 regarding the effect of state taxes on local economy. She found that for every 1 percent decrease in the state corporate income tax rate there is a 0.3 percent increase in new job creation, compounded annually. Furthermore, she found an inverse correlation between the marginal personal state income tax rate and high-tech service jobs as a percentage of jobs in the state. That is, the lower the income tax rate, the greater the percentage of high-tech service jobs, and vice versa.
The marginal state corporate income tax for a multi-state corporation in Arizona is 3.5%. Elimination of the state corporate income tax can be expected to generate an increase in job creation of approximately 1.2% per year, compounded annually, and increase the number of high-paying, high-tech manufacturing jobs, according to economist Debra Roubik.
Elimination of the state personal income tax will assure that a significantly greater proportion of those additional jobs that are created will be in the high-paying high-tech service fields.
Arizonans are losing out to residents of other states when it comes to growth in earnings and higher paying jobs. Arizona's residents are losing out to states like Nevada, Texas, Washington, and Florida, where the absence of income taxes create jobs with substantive earning potential, jobs with a future. Sure Arizona has a low unemployment rate. But far too many Arizonans are just barely "getting by" in low end jobs without much of a future. Eliminating the Arizona personal and corporate income taxes is the most effective and efficient social welfare program our state can ever put into place.
A recent economic study by VisionEcon, using Arizona Departmentof Revenue Annual Reports, demonstrates that, using historical trends, the projected annual increase in sales tax revenue generated by the typical growth patterns in the Arizona tax base (Arizona employment is projected to continue growing by almost 2% more than the national average), could be used to painlessly reduce income tax collections every year. The result would be a "revenue neutral" elimination of the income tax in just seven years. This does not include any dynamic analysis. That means it does not take into account the added revenues we would get from the boom in economic activity and job-creation coming about from reducing or eliminating the income tax. It also does not take in to account revenues from the luxury tax and estate taxes, among others, that would also be increasing and could be applied to offset income tax revenues.
Thus, using dynamic scoring, it is plain to see how easily the state's revenue stream can accommodate elimination of the personal and corporate income tax.
Nine states, many with populations and social problems much greater than ours, with more extensive government services, social "safety nets," and higher education systems, states like Washington, Florida, Tennessee, and Texas, manage nicely without an income tax. Tennessee provides "universal health care" to its citizens, a program called "Tenncare," without an income tax. Arizona has four years to study and learn the best methods from these and other states during its transition to its new tax tructure.
An Arizona Republic news article on April 2, 2000 reported that approximately $4.2 billion in sales tax revenue goes uncollected each year as a result of over 600 exemptions in the sales tax, most of which were enacted after intense lobbying from special interest groups. This revelation came as news to most Arizona citizens in the private as well as the public sector. Few were aware these exemptions were ever passed into law. And these exemptions are almost double the revenues currently collected from the income tax. Some of the special interests who benefit from these exemptions need them to offset the effects of the income tax, that's the tradeoff. Special interests are holding the average Arizona citizen and business hostage to the income tax. Is this taxation with representation?
Governor Hull, in that same Republic article, pointed out that it is politically extremely difficult to overcome the will of those special interests. But if the Taxpayer Protection Act was in effect, many of those exemptions may have had to get voter approval in order to go into effect, since they may have required an increase in some other tax to offset the exemption. The special interests would have thus been cut out of the loop, instead, today we see the voters cut out of the loop. Furthermore, many special interest groups would not find it necessary to seek exemptions if they didn't have to pay personal or corporate income taxes.
What we are advocating is in keeping with the recommendations and spirit of the National Governor's Association at their February 26, 2000 meeting. They advocate more responsiveness to the citizenry, more accountability of expenditures to the electorate, more targeting of revenue sources, more "customer-oriented" prioritizing of fiscal and financial conduct.
The Taxpayer Protection Act is the first electoral manifestation of the new wave of "response-ability" that is sweeping the country. First it swept the business community which transformed itself so as to be more adaptable, efficient and more responsive to their customers. The boon in the Internet and the "New Economy" were instrumental in this shift. Now, as suggested by the NGA policy statement, the idea of "response-ability" is sweeping the public sector. Arizona has the opportunity to be the first state in the union to catch this wave.