By Yellow Sheet Report

Published: March 10, 2010 at 12:07 pm

The primary campaign explanation to the McCain/Kyl statement against Governor Brewer’s sales tax increase was also backed by Democrat consultant Bob Grossfeld, who said John McCain acted to keep from being “boxed in” by J.D. Hayworth. “This had nothing to do with the governor, who is collateral damage, but everything to do with Hayworth,” he said. Grossfeld declined to offer his opinion on the proposal, but said Hayworth has proven his abilities to fight hard political campaign battles. Grossfeld, who consulted Democrat Steve Owens on two unsuccessful campaigns against Hayworth in the 1990s, said the following: “I’ve been through too many campaigns where people have underestimated John David Hayworth. You do so at your own peril.”

To read more on this item plus all the stories in the March 9 Yellow Sheet Report, go to www.yellowsheetreport.com (Yellow Sheet Subscription Required).

by Byron Schlomach, Ph.D.
Goldwater Institute
 
When government revenues drop during economic downturns, there are only three choices government officials have at the state and local levels. They cannot print money so they are left with reducing spending, raising taxes, or borrowing. Raising taxes is the worst option, with borrowing a close second.

Raising taxes assaults the very marrow of the economy; draining resources from the private sector at a time when it can least afford the loss. Borrowing money means an uncertain future burden. Both options make it harder to weather future economic storms. Right now, the state is spending $700 million more each month than it is collecting in tax revenue. All levels of Arizona government have a combined $41 billion in bonded debt.

Yet, many in government seem unconcerned. Everywhere one turns, new taxes are proposed. On Tuesday, Scottsdale and Tempe voters approved higher taxes on hotel room rentals. Phoenix just imposed a 2 percent food tax. The legislature is considering raising car rental taxes to pay for a new spring training stadium for the Chicago Cubs. The legislature also wants to raise license plate fees. Tucson is pondering a number of potential tax increases.

On May 18, voters across Arizona will consider an 18 percent increase in the state sales tax. Studies show that raising the sales tax by 18 percent will cut the state’s real economic output by $1.2 billion and that Arizonans will see their total after-tax income, already hit hard by recession, fall by an average of $300 per household.

What’s more, these proposals don’t take into account that the state’s property taxes went up this year, or the electricity tax passed by the Corporation Commission a few years ago.

This state has lost more than 10 percent of its private employment compared to its peak. State and local governments together have lost less than 6 percent of their workforces. The capacity of the private sector to pay higher taxes is at the breaking point. Even with an economic recovery, increased taxes will only feed an even bigger government that will be that much harder to finance in the next inevitable recession.

For now and for the future, reducing government spending is the only principled solution to the problem of shrinking government revenue.

Dr. Byron Schlomach is an economist and the director of the Center for Economic Prosperity at the Goldwater Institute.

FOR IMMEDIATE RELEASE,
Contact: James Valvo (703) 224-3200

U.S. House Candidate Jim Waring Applauded for Signing No Climate Tax Pledge

PHOENIX—The Arizona chapter of the free market grassroots group Americans for Prosperity (AFP-AZ) and the Arizona Energy Forum today applauded U.S. House candidate Jim Waring (3rd District) for signing the group’s “No Climate Tax Pledge.” Waring joins more than 400 lawmakers and candidates on the federal, state and local levels pledging to “oppose legislation relating to climate change that includes a net increase in government revenue.”

“The one thing elected officials should be able to agree on is that global warming shouldn’t be used as an excuse to hike taxes on citizens and businesses,” said AFP-AZ State Director Tom Jenney.  “We encourage all of Arizona’s elected officials and candidates for elected office to sign the pledge.”

Other Arizona signers include U.S. Representatives Trent Franks, John Shadegg, and Jeff Flake, as well as numerous federal candidates, state senators and state representatives.

“The Arizona Energy Forum is pleased Jim Waring has signed the pledge,” said Chairman Troy Hyde.  “His pledge is an excellent example for other candidates and lawmakers who oppose a climate tax.”

Cap-and-trade took its first step toward enactment last year when the U.S. House narrowly passed the Waxman-Markey energy tax bill, which escaped the lower chamber by a scant seven votes despite significant bipartisan opposition.  The U.S. Senate has struggled to pass companion legislation, with several key Democratic senators expressing opposition to the energy tax bill.

President Obama has made no secret of his support for the bill, which would be the largest tax increase in American history.  The non-partisan Congressional Budget Office scored the House plan as an $846 billion increase in federal revenue, a burden that will be borne by taxpayers and consumers for decades to come.

“Using the guise of climate change to transfer dollars from hard-working citizens to bureaucratic big government is unacceptable,” said Jenney. “Regardless of their stance on global warming, this should be common ground for all of our elected officials at all levels of government.”

The pledge is available online at www.NoClimateTax.com.  AFP does not endorse candidates.  All elected officials and candidates are encouraged to sign the pledge and go on the record in opposition to using the climate change issue to increase taxes and grow the size of government.

Americans for Prosperity (AFP) is a nationwide organization of citizen leaders committed to advancing every individual’s right to economic freedom and opportunity. AFP believes reducing the size and scope of government is the best way to safeguard individual productivity and prosperity for all Americans. AFP educates and engages citizens in support of restraining state and federal government growth, and returning government to its constitutional limits. AFP has more than 975,000 members, including members in all 50 states, and 30 state chapters and affiliates. More than 60,000 Americans in all 50 states have made a financial investment in AFP or AFP Foundation. For more information, visit www.americansforprosperity.org
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by Clint Bolick
Goldwater Institute
 
It was like a scene from Atlas Shrugged: Polly Shaw of China-based Suntech told an Arizona House Government Committee hearing that massive solar production subsidies and even bigger consumer subsidies were not enough. If the Legislature passed House Bill 2701 and repealed the Arizona Corporation Commission’s rules that require utility companies to purchase increasing amounts of solar energy over the next 15 years regardless of the projected $1.2 billion cost to consumers, her company would pull its operations and a few dozen jobs from the state.

The Committee rejected her threat, approving the bill 5-2. But the next day, Governor Jan Brewer and Speaker of the House Kirk Adams, who co-sponsored the bill before deciding to kill it, successfully pressured the primary sponsor, Representative Debbie Lesko, to withdraw it.

Solar may be the most-subsidized industry in America, and is perhaps the only product that the Arizona government forces people to buy regardless of cost or technological feasibility. Solar doesn’t yet make sense as a wide-spread energy policy, and the mandates vastly exceed the Commission’s rate-making authority. That is why the Goldwater Institute is challenging the rules in court and 51 legislators co-sponsored the bill that would repeal them.

So, the solar lobby invoked the one word that will make normally sensible elected officials do crazy things: jobs. Yes, Suntech will employ 75 people. But between the lavish subsidies and costly mandates these may be the most expensive jobs ever created. Nevertheless, the strategy eventually worked; the bill is dead for now.

Suntech’s Shaw claimed the bill would “obliterate the demand for solar,” which may be true if that demand primarily is government-created. Mandate-based industrial policy didn’t work out well in the Soviet Union and it won’t work in Arizona. What’s especially perplexing, though, are the supposedly “pro-market” politicians who think its time has come.

Arizona should stop spending more and more in a frenzied competition with other states over who can give the biggest subsidies to solar and instead create a favorable tax and regulatory climate for all businesses, large and small, in any industry.

Clint Bolick is director of the Goldwater Institute Scharf-Norton Center for Constitutional Litigation.

FOR IMMEDIATE RELEASE: Monday, March 8, 2010

JOINT STATEMENT BY SENATORS JOHN McCAIN AND JON KYL REGARDING PROP. 100

Washington, D.C. – U.S. Senators John McCain (R-Ariz.) and Jon Kyl (R-Ariz.) released the following joint statement regarding Proposition 100:

“We appreciate the hard work that the Governor and the Legislature have done to try to solve the state’s fiscal problems, and though we hadn’t planned to comment on what is rightly a state issue – the proposed increase in the state’s sales tax – we’ve been asked by various news media for our views.

“We support the right of Arizonans to decide the issue of a short-term sales tax increase on the local level.  However, as Arizonans and Americans across our nation continue to face perilous economic times, we fundamentally oppose increasing taxes on small businesses and working families.

“We recognize the difficult fiscal situation Arizona finds itself in and we appreciate the tireless dedication by our state’s elected officials to solve the budget problems.”

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Please post the McCain vs. Hayworth comments on the prior post… here, let’s discuss what the Sonoran Alliance’s readership thinks of the prospects for passage of Proposition 100… and, for that matter, the prospects for Jan Brewer’s campaign to capture the GOP nomination for governor if the sales tax increase fails on May 18th?   — MBW    

In an article recently posted on the front of the Arizona Guardian website, McCain claims amnesia about the biggest proposed tax increase in Arizona’s history, crafted by Governor Brewer to appear on ballots May 18, which will up Arizona’s sales tax by 18%:

he hasn’t “given much attention” to the governor’s 1-cent sales tax referral or knows how he intends to vote on one of the state’s most pressing issues.

Then, barely a few hours after JD Hayworth issued a statement this morning against the sales tax increase (below), McCain issued a joint statement with Sen. Kyl declaring he is against the tax increase.

It is extremely disturbing that McCain had no clue about this proposed tax increase in his own state, which has probably been the biggest issue in Arizona politics over the past year, with a perpetual showdown at the State Capitol between Governor Brewer and the Republican-dominated state legislature over it. Governor Brewer won recently and finally got it referred to the ballot a few weeks ago. McCain is frequently accused of ignoring Arizona in favor of the national scene so this comes as no surprise to Arizonans. In fact, McCain recently told voters that he was going to run for Senate based on what he can do for Arizona in the future, not what he’s done in the past.

It is almost as disturbing that McCain was able to decide within a few hours his position on what is probably the most high-profile, divisive political issue facing Arizona. Unlike principled conservatives, McCain has a poor record on taxes, so it’s not like he could easily come to a quick conclusion opposing the tax hike.

Governor Brewer has endorsed McCain and strongly supported him. Now McCain is throwing her under the bus by opposing the tax increase, which she had staked her career upon. Obviously terrified by conservative JD Hayworth, McCain is back to flip-flopping into a conservative while he’s running for office. He flip-flopped on regulating vitamins last week, changing sides to oppose a bill he had originally sponsored with a Democrat. Does he stand for anything?The only thing he seems to be consistent on is flip-flopping.

By Justin Olson

In Maricopa County, more than half of the districts with override elections on next week’s ballot are asking voters to approve an override that the voters already rejected. In all but one of those districts, the voters rejected the overrides only four months ago. In some districts, such as Dysart Elementary and Union Elementary, the defeats were resounding with “no” votes outnumbering “yes” votes by more than 2 to 1.

The message these districts are sending is clear: The taxpayers don’t get to say no. The districts are now spending taxpayer dollars to put the same questions before the voters when the voters have already spoken with a strong voice rejecting the overrides.

Last year’s legislation authorizing an expansion of school district overrides also provided one-time authorization for a March election so that districts could implement overrides under the new limits. Districts could not implement the new limits in November because the new limits became effective after the November elections. This legislation specified that districts could cancel their November elections in order to wait for the March election when the new limits would apply. Next week’s election was not intended to provide districts a second chance to ask voters to approve overrides that they rejected in November.

The override expansion that the Legislature passed last year increased the amount a school district can ask voters to approve in a general budget override known as the maintenance and operations (M&O) override. The new law increased the M&O override limit from 10% of a district’s budget to 15% in most cases and as high as 17% for certain elementary districts. ATRA opposed this override expansion for the following two reasons.

First, as some districts routinely pass multiple overrides and other districts operate with none, increasing school district funding through voter-approved overrides increases inequities among school districts.

The Arizona Constitution requires the state to establish a “general and uniform” school system. The courts have consistently ruled that this obligates the state to ensure a certain level of equality in school district expenditures and tax rates.

Expanding overrides increases inequities among school districts and puts the state at risk of costly lawsuits.

ATRA warned the Legislature of this constitutional concern when the Legislature considered passing this measure. No less than eleven days after the governor signed this legislation into law, two separate cases were filed in Superior Court suing the state to rectify existing inequities in public school expenditures.

Second, ATRA opposed this override expansion because it will lead to substantial property tax increases. This increase in override capacity could result in property tax increases of up to $193 million statewide.

While this 5% expansion of the M&O override replaces the 5% specialized K-3 override, the increases will result primarily because the general M&O override is utilized much more frequently. In 2009, there were 68 districts that levied the maximum M&O override but levied no K-3 override.

If the voters of these districts continue to support the M&O override at the maximum allowable level, the property taxpayers of these districts will see a $143 million increase in their bills. This increase comes on top of the $250 million record property tax increase that occurred last year with the reinstatement of the state equalization rate.

Some argue that tax increases should not be a concern if the voters are choosing to tax themselves. In many cases, the voters are not choosing to tax themselves but are actually authorizing the district to tax someone else as the bulk of the property taxes are paid by business owners. Due to Arizona’s assessment ratios, business owners pay more than double the amount of property taxes that a residential property owner pays on a similarly valued property. Arizona consistently ranks among the ten states with the highest business property taxes. These high taxes deter businesses that would otherwise locate in Arizona and provide our economy with sorely needed jobs.

Proponents of this override expansion sold the legislation as a necessary measure to allow districts to backfill cuts in state aid. While the override expansion allows a 5% increase in school district budgets, the implemented reductions were only 2.7% of the same budget limit.

With the use of federal funds, school districts have actually increased their spending during this fiscal crisis. A review of the fiscal 2009 and fiscal 2010 budgets of the districts in Maricopa County that have override questions on next week’s ballot shows revised 2010 budgets that on average are 6% higher than the amount the districts adopted in July 2008 before the fiscal crisis began.

Justin Olson is a senior research analyst for the Arizona Tax Research Association

Today’s Phoenix Business Journal ran the following article by Mike Sunnucks:

U.S. Rep. Jeff Flake, R-Mesa, has been quick throughout his tenure to oppose federal subsidies and special incentives. But the East Valley congressman is keeping mum on state and local proposals within his district to build a new Cactus League ballpark in Mesa for the Chicago Cubs.

The Legislature is considering a plan to impose 8 percent ticket fees on all Cactus League games and $1 Maricopa County rental car tax to help pay for the Cubs stadium. In addition, the city of Mesa will ask its voters to approve bonds and new spending for the $86 million project.

Phoenix Mayor Phil Gordon, the Arizona Diamondbacks and other Cactus League teams oppose the ticket fee idea. Instead, Gordon and D-backs officials would like to see special tax districts created around spring training ballparks and in downtown Phoenix to capture and dedicate sales tax revenue toward those areas, and perhaps bond against future expected revenue.

The Cubs have threatened to move to the Grapefruit League in Florida unless a new ballpark is built here by 2013.

Flake is not taking a stance either on the ticket fees or the tax district idea to help pay for a new stadium.

“We’re going to hold off on commenting for now,” said Flake spokesman Matthew Specht.

The city of Mesa is a prime backer of the ticket fee and car rental tax increase to keep the Cubs from moving.

A bill that would impose ticket fees and the car rental tax has been approved by committees in the Arizona House of Representatives. House Bill 2736 is not yet scheduled for a full House vote.

“This is budget week, and the Cactus League bill is on hold for this week,” said House Majority Leader John McComish, R-Ahwatukee.

by Byron Schlomach, Ph.D.
Goldwater Institute
 
Adapt and overcome. This is part of a Marine Corps mantra born of a resource scarcity the service suffered when its equipment consisted mostly of hand-me-downs from the Army. This is exactly the kind of can-do spirit that we need from government officials today.

The Arizona economy has lost more than 300,000 jobs. Tax revenues have plummeted at every level. We cannot afford to continue funding government at its former levels. Unfortunately, officials with the City of Phoenix have demonstrated an unwillingness to adapt to changing circumstances.

Phoenix says it has eliminated 500 positions, but that’s only about 3 percent of the city’s 14,000 employees. Due to attrition, the actual number of layoffs will be less than 50, or around three-tenths of 1 percent. The City Council did eliminate an administrative assistant position that paid $95,000 a year. That’s a start, but it begs the question of how many other high-dollar assistant positions have been preserved. And, it lends credence to the assertion that the average cost of a city employee is $100,000.

Residents of Phoenix were told that the city needed to impose a 2-cent food tax to protect police and fire services from budget reductions. But on a recent episode of Sunday Square Off, Mayor Phil Gordon said he was shifting police officers to other city departments whose budgets were partially funded through federal or state tax money.

So, really, the City Council has made it more expensive for people to put food on the table so that they can protect the city’s $1 million budget for “arts and culture” and the $1 million budget for “government relations,” i.e. lobbyists.

When Mayor Gordon delivers the “State of City” address next Tuesday, he will talk about all the changes going on at City Hall, all the hard choices he’s made. But the truth is, the new tax on groceries and the refusal to realign government to focus on core functions show nothing has changed and the state of the city is disappointing.

Dr. Byron Schlomach is an economist and the director of the Center for Economic Prosperity at the Goldwater Institute.

by Byron Schlomach, Ph.D.
Goldwater Institute
 
Last week, the House Committee on Natural Resources and Rural Affairs approved HCR 2040, a measure that would refer yet another tax increase to Arizona voters. The proposal would require every Arizonan to pay an additional $12 for each license plate registration. The money would be directed to the state parks agency in an attempt to reopen some sites and to fund improvements at others.

HCR 2040 would establish this new tax at a time when few can afford the luxury of paying for other peoples’ recreation. Not everyone benefits from the state parks any more than everyone benefits when my family dines at a restaurant.

This new funding mechanism would place state parks in a position of unaccountable financial independence somewhat similar to the state transportation department and the new Early Childhood Development & Health Board. Self-funded agencies often are not particularly responsive to those they are supposed to serve.

One of the biggest complaints from legislators as they work on the state budget this week revolves around Proposition 105, the 1998 initiative that protects voter-approved spending. The repeated excuse for failing to respond to falling tax revenues has been that much of the spending is off-limits to legislators.

HCR 2040 would make this problem worse, placing more of a financial burden on Arizonans that cannot be easily offset and would further erode our tax-paying capacity. Tax revenues should be spent according to current circumstances and constitutional limits, not momentary whims that later become inflexible mandates.

There is another solution on the table to keep parks open: let private companies manage them and pay the state for the privilege. Last week Fox News commentator Glenn Beck interviewed a local business owner who wants the opportunity to keep our parks open. Until the legislature gives this idea a fair shake, a tax increase shouldn’t even be discussed.

Dr. Byron Schlomach is an economist and the director of the Center for Economic Prosperity at the Goldwater Institute.