I had the opportunity to attend a presentation about the idea of eliminating Arizona State Income Tax today. The presenters were Steve Moore and Stephen Slivinski. Steve Moore is a contributing editor to the Wall Street Journal, often seen on Fox News, CNBC and is very active in policy debate and opinion. Stephen Slivinski is the Senior Research Fellow Center for the Study of Economic Liberty at ASU WP Carey School of Business.
I am happy to see the concept of Economic Liberty being a topic of conversation and education at ASU. I feel the concept of capitalism is becoming more vague as regulations, taxes and restrictive policies increase over time. Is our society forgetting to some degree what capitalism really is, how it works and how it benefits our country?
Mr. Slivinski provided a 5 Step Summary of how to work towards the elimination of state income tax. Those steps are listed here from today’s handout:
- Maintain spending discipline – Keeping the state’s general fund budget to no more than a 2.3% growth rate (an average of $230 million in new spending each year) will be critical to phasing down the income tax.
- Institute a flat-rate income tax in year one – Collapse current five-bracket personal income tax system to flat rate of 4.1%. Include more generous exemptions for poor families. Permanent instant expensing. No capital gains tax.
- Find budget savings through program reform – Reforms to urban revenue sharing and the Arizona Commerce Authority can save up to $450 million each year.
- Phasedown the income tax rate each year through FY 2023 (or sooner) – Spending discipline and robust economic growth can assure a total phaseout of the personal income tax in seven years.
- (optional) Temporarily increase sales tax rate by up to one cent – Voter approval of a one-cent (or less) sales tax rate increase can speed up or guarantee the phasedown of the income tax. The sales increase must be temporary, all revenue raised must go to buying down the income tax rate, and the sales tax rate increase must disappear in seven years or when the income tax rate reaches zero, whichever occurs first.
(5 Steps Source-A Path to Eliminating the Arizona Income Tax by Stephen Slivinski)
Steve Moore shared that 9 other states currently do not have an Income Tax. Six others are aggressively trying to eliminate their income tax, and the message was clear they would like to see Arizona be the 10th state in the union to eliminate Income Tax. He cited several statistics indicating states with zero income tax had much better business growth, population growth and economic growth. He also referred to the GINI index which can be found by state, and his indication was that zero income tax states looked better on this measurement vs. the extremely high income tax states such as California and New York. The GINI attempts to measure income inequality, also referred to as the GINI coefficient or ratio.
The argument against flat tax rates being regressive was addressed by proposing an expansion of the zero tax bracket until the income tax was done away with completely.
One guest asked how Arizona would prevent municipalities from creating their own new income taxes. This was acknowledged as a problem and the solution was less clear, but the idea was that any state income tax changes would need to institute policy to prevent local towns and cities from creating their own new taxes to replace the revenue sharing they receive from the state.
Questions about the stability of income sources was another topic of conversation. Of the three income sources Income, Sales and Property, they indicated Income Tax was the most volatile. A shift towards relying on Sales and Property tax was explained as being more stable overall.
The presenters were passionate about the topic and the audience was eager to digest the information. I found the topic to be thought provoking. More can be learned about the idea and concept of Economic Liberty through The Center for the Study of Economic Liberty website http://research.wpcarey.asu.edu/economic-liberty/
How topics like this will be viewed by the current administration is interesting to think about. Even more thought provoking is how ideas like this will be viewed by the candidates vying for the White House in upcoming Presidential Election!