Goldwater Institute Daily Email
April 22, 2010
Proposition 100 supporters are touting estimates from economists at the University of Arizona and Arizona State University. They claim an 18 percent increase in the state’s sales tax would cost fewer jobs than the number of jobs that otherwise may be lost due to reductions in the government spending.
Let’s think about this. If the state economists are right, it means the more we tax and let government spend, the more jobs we’ll have. Well, let me get on that bandwagon! Let’s not stop at an 18 percent tax hike; let’s double the tax rate and government spending along with it. We’d get a whole lot more economic growth.
The absurdity of this tortured economic reasoning, based on a popular Depression-era theory, can be illustrated by looking at a photo of earth taken at night. If the state economists were right, North Korea would be more than a big, dark blot. North Korea and Cuba would outshine the world with their prosperity.
Last year the Goldwater Institute asked the independent Beacon Hill Institute at Suffolk University to estimate the economic impact if the state raised the sales tax. They found the state will lose 14,000 private sector jobs.
State finances will be in worse shape in 2014 if the proposed 18 percent increase in the state sales tax passes on May 18, according to long-term projections by the Joint Legislative Budget Committee. With Proposition 100’s passage, the deficit in 2014 would be almost $1 billion. Without Prop. 100’s tax increase, the projected 2014 deficit would be $200 million.
These new estimates highlight the fact that Prop. 100 fails to address the state’s long-term structural deficit brought on by too much spending. Past spending and new programs were not adequately funded when they were signed into law. But the damage this caused to the state’s financial stability wasn’t clear for a few years because tax revenues spiked during the real estate bubble. JLBC’s deficit projections assume the state maintains current eligibility requirements for taxpayer-funded health care, which is likely given the new mandates passed under the federal health care bill.
And the budget deficits go on: Prop. 100 would fix nothing
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Tags: Arizona, Economy, Media, News Item, Proposition 100, Taxes
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