The latest from Far Right field...

Better late than never: some insight into the budget the legislature passed, from Russell Pearce (8/22/09). Sign up for alerts at his website.

-----------------------

Dear Friends:

In any other year, you would have already received my end-of-session wrap-up, detailing what transpired during the legislative session. As it turns out, while the regular session finally ended on July 1st, we have been in a special session for nearly the entire time since, trying to resolve a serious impasse over the state’s budget.

So I thought this would be a good time to report to you anyway. There is a lot in the newspapers and they don’t always get the facts right. So it is important that we disseminate the facts to as many people as possible. PLEASE READ THIS, THEN PASS IT ON TO YOUR FRIENDS!

First, a review of the situation as it is:

• Arizona's economy has been severely impacted by the worldwide recession. The recent decline in commercial activity is reflected in the state's record-setting budget shortfall as demands for government spending continue to outpace the economy's ability to generate tax revenues.

• The original budget signed by former Gov. Janet Napolitano for fiscal 2009 has had to be repaired several times and has left the new governor and State Legislature with severely limited options.

• Governor Brewer has insisted that any budget package include a referral to the ballot of a one-cent sales tax increase for three years (1cent = an 18% increase). In our negotiations since, we have reduced that increase to one-cent for two years, and half a cent for the third. We have also added a number of tax cuts for businesses and individuals to help jump start Arizona’s economy and to increase our competitiveness with neighboring states.

• A three-year moratorium on a $250 Million annual property tax was due to run out this year and the Legislature made its permanent repeal a top priority. We repealed it as part of the first budget package, but that was vetoed by the Governor because the package did not contain her tax referral. We continue to try to permanently repeal this property tax.

• The entire budget package that has been negotiated has passed the House of Representatives with the support of 32 out of 35 Republicans. The Governor has indicated that she will sign it if we can get it passed in the Senate. Sadly, we have only been able to convince 15 of the 18 Republican State Senators to support the package and the Democrats are using every means at their disposal to keep their members in line, and voting No. That means that we are one vote short of being able to pass a budget, cut taxes, and start healing our state’s financial outlook.

I will give you my opinion on the overall package in just a moment, but I want to share with you some important numbers from that package. You need this data to counter the falsehoods that our opponents are already trying to spread.

• To govern is to choose. Republican legislators have chosen policies that manage the state's finances in a manner that prepares government agencies for the near-term realities of the state's tax collections, while doing no harm to an ailing and fragile economy upon
which state government relies.

• The budget the legislative majority passed takes necessary action to reduce the size of government. Like employers and households across Arizona, state government has to tighten its belt and prepare for what may very well be a long recession and slow recovery. We have included a 5% reduction in the number of full-time employees working within state government.

• Opponents of this budget say it will decimate state services and education. This is simply not true. Our budget tackles the structural deficit without raising taxes, while continuing to fund essential state services and education out of the general fund. Our budget also directs additional funding toward those services and education with federal stimulus dollars.

• The legislative-majority budget allows the state to operate at nearly 95 percent of its funding levels from fiscal 2009. Arizona households and employers have already adjusted their spending levels to deal with the poor economy, most with reductions far more severe than 5 percent. Families and businesses have had to do more with less. Government must also. Those who cry that “The sky is falling” in the face of a 5% reduction do a great disservice to the truth.

• We have taken measured steps toward significant tax reform and improved our potential for recovery by prospectively addressing excessive commercial and agricultural property taxes.

• We had avoided a property-tax increase that was due to return and reappear on taxpayers' property-tax statements this fall. Raising taxes now will only exacerbate the tough economic climate we face, and we find it unconscionable to ask the people of this state to endure a tax increase on top of these already crippling economic times.

• Clearly, Arizona's deficit has hit historic highs, leaving us with tough and even tougher solutions to balancing our state’s budget. With so few options, we can learn from California, where voters refused a tax increase to help balance their budget, opting instead for further cuts to government programs. Or we can look to Washington State, where they balanced their budget by cutting $4 billion in government spending over two years. In both states – even with a Democratic majority - voters and lawmakers alike recognized that new taxes do not solve their budget problems.

We have long contended there have been no easy choices as we balanced this budget, but our solution is the best for Arizona.

TENURE?

Regarding my position on the budget bills being debated:

My position regarding taxes is clear and well-documented. I am unalterably opposed to raising taxes and I hold as a core conviction that we are over-taxed as citizens of this country. This position is supported by the tens of thousands of Arizonans who have attended the various Tea Parties this year.

Accordingly, I have been opposed to Governor Brewer’s push for a referral for an increase in our sales tax, and I have voted for the budgets we passed that balanced our state’s budget with that increase.

Unfortunately, Governor Brewer vetoed that budget and insisted that she would not sign a budget that did not have a referral as part of it. Much as I disagree with that position, she is the Governor and I’m not. To pass any budget and get it into law requires that agreement of the Legislature AND the Governor, so the task before us is to get the very best deal that we can for the taxpayers of this state.

I believe the current deal is exactly that. While the Governor still gets her referral, it is smaller than she originally wanted. We have included the repeal of the property tax increase (saving taxpayers $250 Million each year) and included corporate income tax cuts ($200 Million each year starting in 2011) and personal income tax cuts ($200 Million each year starting in 2011). Better still, these tax cuts do not require voter approval to take effect, while the Governor’s proposed sales tax increase will. So we have exchanged permanent and certain tax cuts for an unlikely tax increase that, even if passed, will be smaller than the cuts.

Our worst case scenario is that our overall tax burden will decrease. Our best case scenario is that it will decrease even more!

That is why the package has been approved by and/or promoted by taxpayer advocacy groups like Americans for Tax Reform, the Arizona chapter of the Free Enterprise Club, the Arizona chapter of Americans for Prosperity, the PAChyderm Coalition, and others.

Click here <http://azfec.org/research/HB2015_Good_Trade_Off.pdf>
 to read the review of the plan by the AZFEC
(http://azfec.org/research/HB2015_Good_Trade_Off.pdf),

and click here
<http://online.wsj.com/article/SB10001424052970203946904574300083865544254.html>
 for an op-ed which appeared in the Wall Street Journal
(http://online.wsj.com/article/SB10001424052970203946904574300083865544254.html).

In Conclusion:

Governor Brewer thinks that Arizonans will support a higher sales tax. I believe they will soundly reject it. Nevertheless, she is the Governor and she has a shared say in the makeup of our budget package, so I will give her that referral in exchange for the spending cuts, reductions in the size of state government, repeal of the property tax, and tax cuts for businesses and families. Then I will work to defeat the sales tax at the ballot box.

I should mention that there are many other good reforms in the budget that eliminate fraud and abuse of our entitlement programs. They require “real proof” of eligibility, cross checking of other data bases to catch those who apply multiple times, or are illegally applying. It also holds government employees responsible to verify eligibility and if knowingly allow folks to get taxpayer benefits they can be charged with a criminal misdemeanor (after all that would amount to theft of public money). Many other reforms are in this budget to protect taxpayers and bring about greater efficiency and
accountability.

This is a good plan and sound strategy. And it works because we have a secret weapon that is only secret to politicians who still just don’t get it. The secret weapon is YOU, the taxpayers of this great state. I trust you to turn out and vote against this tax increase. I trust that you will not be fooled into increasing taxes during a recession, no matter which Madison Avenue firm is handling the television commercials. I trust that the spirit of the Tea Parties and the Town Hall protests is alive and well here in Arizona.

I do not know what the final outcome of this process will be. It deeply troubles me that we are so close to being able to claim victory, yet we are denied it by a single vote. Three Republican senators can cast that “Yes” vote if they want to, but they appear adamant that they will not. Without them, the advantage will shift to the Democrats, and I fear that the ultimate price tag will be significantly higher and that the tax cuts, and needed reforms will be lost completely.

However this ends, I will keep you informed. In the meantime, my eternal gratitude for your prayers and support. Keep up the good fight my fellow patriots. Things have started to move our way and I believe we will taste victory before all is said and done.

Your faithful servant,

RP

SOME ADDITIONAL REFERENCE MATERIAL

HB 2015 includes permanent tax rate reductions with an estimated tax savings of $400 million a year. These marginal rate cuts take effect January 1, 2011. The corporate income tax rate would drop 30 percent, from 6.968% to 4.86%. The individual income tax rates would decline by 6.6 percent.

Corporate Income Taxes

Arizona’s current corporate income tax rate is the third highest among ten western states (only California and New Mexico’s are higher). This tax change would drop Arizona to the fourth lowest among those states including three states that don’t tax corporate income (Nevada, Washington, and Wyoming).

High taxes increase the cost of capital. There are countless papers that demonstrate the negative consequences high corporate taxes have on job growth, investment, and wages. According to a new study by the Tax Foundation, “The Corporate Income Tax and Workers’ Wages: New Evidence from the 50 States,” Senior Fellow Robert Carroll, Ph.D., finds that states with high corporate income taxes have likely depressed their workers’ wages over the long term, while states with low corporate taxes have boosted worker productivity and real wages.

According to the National Center for Policy Analysis:

- The Congressional Budget Office estimates that workers bear slightly more than 70 percent of the burden of high corporate taxes in the form of reduced wages.

- A $1 increase in corporate taxes tends to reduce real median wages by 92 cents, concludes an Oxford University study.

- A 1 percentage point increase in corporate tax rates is associated with nearly a 1 percentage-point drop in wage rates, according to an American Enterprise Institute (AEI) study.

The HB 2015 corporate income tax cut would do more for long term economic development and job creation than any of the tax credits and industrial policies passed in recent years because it would immediately signal to corporations both in and out of Arizona that a more business friendly and competitive tax structure is available.

Individual Income Taxes

HB 2015 includes a 6.6 percent across the board reduction in Arizona personal income taxes. As a policy matter, this tax cut would lessen the government burden placed on both entrepreneurs and employees of entrepreneurs. In this economy, especially, that’s a good thing. According to NFIB, more than 70 percent of Arizona small businesses pay taxes in the individual income tax.