Tax Hike Could Cost AZ 14,400 Jobs

The Goldwater Institute today said that a new economic model shows a tax hike could cause 14,400 lost jobs as Arizona's economic output would fall by $1.2 Billion.

To close the state's budget deficit Governor Jan Brewer has proposed a $1 billion tax increase. New findings announced today show that if the State of Arizona were to implement a $1 billion sales tax increase, 14,400 private jobs would be lost.

These new findings are the result of economic modeling conducted by the Beacon Hill Institute at Suffolk University in Boston, Massachusetts. The Goldwater Institute (GI) asked Beacon Hill to examine the impact of a $1 billion sales tax increase on employment, state economic output, and incomes.

Beacon Hill found that a $1 billion sales tax increase would cause the state to lose 14,400 private sector jobs; the state's real economic output would decline by $1.2 billion; and Arizonans would see their total after-tax income, already hit hard by recession, fall by $760 million, or almost $300 per household on average.

In addition to the $1 billion tax increase proposed by the governor, Arizona property owners face a tax increase in July when the state equalization tax comes back on the books. Lawmakers and the governor could decide to permanently repeal this tax. In the event that lawmakers choose not to repeal it, and even if it becomes the only tax increase to go into effect this year, almost 4,000 private jobs and $385 million in after-tax income will be lost.

"The Beacon Hill Institute has an excellent reputation for modeling the real effects of tax changes," said economist Dr. Byron Schlomach, Director of the Goldwater Institute's Center for Economic Prosperity. "These numbers show that these tax increases will hurt our economic recovery by putting more Arizonans out of work."

In a December 18, 2008 policy brief, http://www.goldwaterinstitute.org/AboutUs/ArticleView.aspx?id=2460 , "A Fresh Start for Arizona: Proposals for Closing a Billion-Dollar Budget Gap," the Goldwater Institute says that tax increases are not an option and should not be on the table for discussion.

In just the last five years, Arizona General Fund spending increased 66 percent, while population and inflation grew at just 33 percent. The Goldwater Institute policy brief claims that in many cases returning agency budgets to fiscal year (FY) 2006 levels would do much to put Arizona on a more secure financial footing.

Some of the cuts suggested by the Goldwater Institute include; elimination of the Office of Tourism for a $10 million saving, elimination of the Department of Mines and Mineral Resources for $500,000 in savings, abolish the Board of Medical Students Loans to save $400,000.

Essential governmental services, such as courts and public safety, also didn't escape the Goldwater Institute's suggested cuts. The policy brief included a $5 Million cut to the Arizona Supreme Court and a 10% cut to the Department of Public Safety to save $6.3 Million and a 10% cut to the Department of Corrections to save $95 Million.