A group of businessmen want to replace Prop. 301’s 0.6 cent sales tax with a 1.5 cent sales tax, resulting in a net increase of 0.9 cent. I, along with Gov. Doug Ducey, support the extension of the 0.6 cent sales tax.
However, I do not support the proposed 0.9 cent sales tax increase because it will position Arizona’s combined sales tax rate (municipality + county + state) as among the highest in the nation. And, it has the unintended consequence of encouraging online and out-of-state purchases which reduce the sales tax collections for Arizona governments. Recall that five years ago, voters defeated Prop. 204’s permanent one-cent sales tax increase to avoid having a high sales tax rate.
Instead of increasing sales taxes, my plan increases income taxes by switching from a marginal tax system to a flat tax system. Currently, Arizona has five income tax brackets (2.59 percent, 2.88 percent, 3.36 percent, 4.24 percent and 4.54 percent) based on gross annual income. I propose simplifying the income tax structure by adopting the top marginal rate (4.54 percent) as the new flat income tax rate. This is expected to generate at least $1 billion in extra revenue, which is more than the amount raised from a 0.9 cent sales tax.
Although a flat income tax is regressive, increasing the sales tax is also regressive. Moreover, the poor and the middle class have the most to gain from an improved K-12 educational system. Arizona’s 4.54 percent flat tax rate will remain competitive with other flat-tax states: Colorado (4.63 percent), Illinois (4.95 percent), Utah (5 percent) and North Carolina (5.5 percent). Although some states have no income taxes, the tradeoff is that they have a higher tax rate for property or corporations or receive revenue from oil or gambling.
The extension of the 0.6 cent sales tax should go directly into the general fund and not be earmarked for specific purposes. This avoids repeating Prop. 204’s attempt at micromanaging the revenue, which voters rejected. Allow the Legislature and the governor to do their job in allocating the appropriations dollars. Unlike 10 years ago, many more conservatives now support establishing full-day kindergarten, raising the salaries of K-12 school teachers and investing into K-12 capital funding.
Arizona needs higher taxes to increase its funding for education while embracing fair and balanced taxation. Again, my plan accomplishes this by permanently extending the 0.6 cent sales tax and adopting a new 4.54 percent flat income tax. This generates well over $1 billion in additional revenue compared to now and will increase after earnings are adjusted from the upcoming minimum wage hikes along with future employment growth.
I ask the business, education and political communities to support my tax plan to send to the voters.
– Sanjeev Ramchandra of Chandler is a math instructor at Central Arizona College. He can be reached at firstname.lastname@example.org