Arizona Tax Research Association: Proposition 204 – Earmarking at its Worst

Vote No On 204

Vote No On 204

The Arizona Tax Research Association ( ATRA ) encourages a NO vote on Proposition 204 (1-16-2012). ATRA has long opposed ballot-box budgeting , where special interests use the initiative process to earmark revenues outside the state’s budgeting process. This initiative is arguably the most egregious earmarking effort ever placed before Arizona voters and it should be rejected.

This permanent sales tax increase locks in place an estimated $25 billion in spending over the next 17 years that can never be changed. Regardless of one’s perspective on the adequacy of education or transportation funding, putting spending for 12 different earmarks on auto-pilot is simply irresponsible. The Great Recession taught us a number of lessons regarding budgeting mistakes that aggravated Arizona’s chronic budget deficits. The biggest lesson was to avoid making permanent budget decisions that tie up billions of taxpayer dollars on the belief that neither the economy nor the state’s priorities will ever change.

In addition to a permanent sales tax rate increase in a state with the second highest combined rates in the nation, the initiative also takes the extraordinary step of freezing the current sales tax base. Freezing the sales tax base will undermine the growing momentum to reform Arizona’s antiquated state and local sales tax code and demonstrates not even a modicum of consideration for the taxpayers saddled with complying with this tax increase.

Lastly, funding for K-12 schools has always been the largest state expenditure. K-12 appropriations are driven by many complicated formulas that account for differences across Arizona schools. Prop 204 (1-16-2012) handcuffs policymakers’ ability to change these funding formulas. Presuming there will never be a legitimate reason to modify these statutes is shortsighted and an abuse of the initiative process.

Kevin J. McCarthy, President, Arizona Tax Research Association, Gilbert

Lori Daniels, Board Member, Arizona Tax Research Association, Chandler

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