Eliminating state income taxes - East Valley Tribune: Opinion

Eliminating state income taxes

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Posted: Monday, October 16, 2006 4:27 am | Updated: 4:04 pm, Fri Oct 7, 2011.

On April 15, the annual ritual of filing income tax reports is a dreadful time for most Americans. Some of us, even after watching government take a large chunk out of every paycheck, have to send even more money to square our debt to Uncle Sam and the state of Arizona.

And those who receive tax refunds still are reminded just how much of our wages is diverted from our wallets to government coffers.

Two of the three candidates for Arizona governor claim they can make that annual ritual a little more pleasant by eliminating state income taxes that are expected to reach nearly $4.8 billion in this fiscal year. Libertarian Barry Hess wants to do so immediately, a rather unrealistic proposal considering that income taxes make up 41 percent of the General Fund, or the equivalent of every dime the state spends on K-12 education and its three universities.

Republican Len Munsil has a more intriguing proposal to build on the latest reduction in income taxes by 10 percent over the next two years. He wants to continue cutting rates by 10 percent until state income taxes are eliminated. Relying on economic history that reaches back to presidents Ronald Reagan and John F. Kennedy, Munsil points out that lower income taxes have tended to create economic activity that, over time, has generated tax revenues in excess of what was originally lost.

However, Munsil has failed to explain how state government would be managed in the time between when the tax cuts occur and business growth catches up. Even the most ardent tax-cutters acknowledge this gap, which provides one reason why the federal annual deficit ballooned under President Bush’s tax cuts before shrinking again in the past two years. Arizona could afford both income and property tax cuts this year because of a predicted $1.5 billion budget surplus along with a relatively healthy economic outlook.

Munsil has blithely asserted he also would reduce the size of state government, which presumably could fill some of the holes created by eliminating the income tax. But Arizonans have shown no interest in a smaller state government. Instead, voters keep approving new programs and funding formulas that require state officials to spend more money each year beyond would be expected from population growth and inflation. Even Munsil wants to spend more with his proposal to ramp up state enforcement of immigration that could cost multiple millions of dollars.

That political reality might give more credence to the stance of Democrat Janet Napolitano, who wants to watch this year’s tax reductions unfold before considering future cuts.

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