Remember when Republicans were up in arms over the “defund the police” movement?
During the last election, Republicans did all they could to pin the “defund” label on Democrats of every stripe, even though the leader of the Democratic party, Joe Biden, said he wanted increases in police budgets, not reductions.
But that was so…2020. And it seems Republicans in Arizona have had a change of heart.
Gov. Doug Ducey and Republican legislators are eyeing a massive income tax cut for wealthy Arizonans, one that will shrink revenues for both state and local governments. The flat tax, as it’s known, will upend our current tax code, replacing progressive brackets with a single, flat tax.
And while that may sound like a fair way to tax individuals, in reality, it’s an incredibly regressive system that will result in lower- and middle-income Arizonans paying a much higher effective tax rate than wealthy Arizonans.
Currently, Arizonans pay anywhere from 2.59% to 4.5% in state income taxes, with wealthier Arizonans paying the higher percentage.
The proposed flat tax is 2.5% for all taxpayers, which would mean little change for low- and middle-income residents but a huge windfall for those at the top. In fact, 91% of the tax cut will benefit the top 20% of taxpayers, while more than 50% of the cut benefits the top 1%.
Merry Christmas, wealthy Arizonans.
But the tax cut won’t simply be a boon for the rich, it will also be a bane for cities and towns.
Local governments have limited means of raising revenues. They cannot implement their own income taxes and instead rely on what’s known as revenue sharing, which means they receive a portion of state income taxes.
According to the Arizona Center for Economic Progress, the flat tax will decrease shared revenues by 27%, meaning cities and towns will lose millions in funding.
We already know what happens when local governments lose a large chunk of funding. During the Great Recession, cities and towns had no choice but to implement hiring freezes and pay cuts for public safety while limiting hours and services at our parks and libraries and on public transportation.
Many of our local communities are just getting back to pre-recession times and hiring for positions left unfilled during the past decade. Do we really want to go back in time?
Of course, we know the real reason Republicans want a flat tax. This is how they exact revenge on voters who approved Prop. 208, the #InvestinEd tax increase.
In November, voters agreed that record wealth gaps were unacceptable, and the top 1% of taxpayers should pay their fair share to help our public schools compete with neighboring states and offer teachers professional wages.
But with the Republicans’ flat tax proposal, wealthy taxpayers wouldn’t simply be off the hook for Prop. 208, they’d actually receive another tax cut.
Republicans claim they’ll make up lost revenue with monies from the general fund, something that will be easy during the next fiscal year because of one-time dollars the state is receiving through the American Rescue Plan.
But what happens the following year? Or the year after that?
The flat tax will permanently slash $1.5 billion from state coffers, and history tells us that when Arizona’s revenues fall, so too does education funding.
During the last recession, the GOP-led legislature refused to allocate voter-approved inflationary funding to schools or make payment for capital expenses. Education groups, which had to sue the state over both issues, are still waiting on a settlement for the latter.
Our last financial crisis should have taught Republicans they cannot live in la-la land, believing revenues will continue to grow indefinitely and making reckless gambles on the state’s future with voodoo, trickle-down economic policies that have never worked.
Our state cannot sustain this type of tax cut. Eventually, state and local governments will need to pull revenues from other sources, which will most likely mean sales and property tax increases. It might even mean another food tax.
We need a state budget that invests in the priorities Arizona voters have made clear they support, such as education and public safety. The flat tax will do the exact opposite.