Tax Increase Debate

March 22, 2010

Transcript:

Ted Simons:
If you'd like to see any of tonight's "Horizon" segments again or view previous editions of "Horizon," check out our website. A one-cent increase in the state sales tax will be on the May 18th ballot. Lawmakers sent the proposed tax increase to the voters in an effort to help balance the state's budget over the next three years. Here to talk about the pros and cons of the tax are state senator Thayer Verschoor, who is the leader of "Ax the tax," a group opposing the plan. Also here is John Wright of the Arizona Education Association. He represents yes on 100, the group supporting the tax. Good to have you both here. Thanks for joining us.

Thayer Verschoor:
Thank you.

Ted Simons:
Let's start with you, Senator. The governor says this tax is needed. Is she wrong?

Thayer Verschoor:
Yes. This tax is a bad idea. It's the wrong time for this tax. Right now we're struggling in our economy. We're trying to recover. We have the opportunity where we're seeing some of our economy recovering in our retail sales and now we're going to add an 18% tax on top of that, which is going to slow that recovery down, if not stifle it altogether. You know, there are several other reasons. You've got the Goldwater Institute out there that says this tax could cost us 24 to 40,000 jobs a year, and right now what we need to be doing is creating jobs and not losing jobs. So those -- and on top of that, it doesn't solve the problem, you know. And it's particularly a regressive tax that hurts low income and fixed income folks the most.

Ted Simons:
Kind of a rough equation there. How do you resolve that?

John Wright:
These are tough times and it's necessary. It's not the first choice for any of us. But right now with the money that's already been cut out of the state budget for three years adding temporarily one-cent per dollar, a penny for your thoughts, you'll hear Arizona firefighters say a penny for Arizona's future. To pull us out of this hole, right now we have slashed spending on schools and that is evident in every classroom in Arizona. You just talked about slashing spending on healthcare and that's going to be evident in emergency rooms. We know that Arizonans are willing to do this. We know that it's temporary and this is exactly the type of measure -- when you're in a deep hole, you have to quit digging, you have to start coming out of it.

Ted Simons:
I asked the governor about her position on this. The spokesperson said she was wrong. The voters voted on this. Were they wrong?

John Wright:
You saw bipartisan opposition and support. All the parties had their own reasons. Yes, there are people who are concerned about the regressive nature of this. We have to be sure we have the necessary money to meet social services and state obligations. Right now there's bipartisan support. The group that comes together to plan this campaign in support of it is extraordinarily varied from businesses to unions, from environmental groups to chambers because it's a broad coalition that recognizes we have to do this now.

Ted Simons:
If this tax vote fails, we're looking at another 900 some odd million dollars in cuts. 60% or so at education in a variety of ways and forms. Can Arizona survive that? Is that good for Arizona?

Thayer Verschoor:
I think we have to look at things that are going to create jobs. We're going to have to do some further reductions, even if this tax passes. I mean, you're going to hear talk about if the tax doesn't pass we'll have to do $900 million in further cuts. Well, Ted, we're in a $2.5 billion structural deficit even if this tax passes. There's going to be further cuts on top of that. I think that's one of the reasons so many Democrats voted against this. They know this is going to solve the problem. Any I believe credible economist will tell you that a tax increase will not get you out of a recession. You can't tax your way into prosperity. It hasn't worked in the past; it won't work in the future. What we need to be doing is looking at ways to create jobs, not things that will take jobs away from the economy. That's what this will do.

John Wright:
There are a few numbers getting tossed around. I haven't been able to find where the Goldwater Institute gets credible data that says the jobs go away. The jobs that go away are the bus drivers, nurse assistants. The sort of jobs these funds support that need to continue and those are the jobs we need to keep. Thayer Verschoor and his colleagues voted for the plan B budget. Of course he's a leader in the Senate. He knows what the outcome was going to be. There was some concern. I think you and others expressed about what does this mean for charter schools because those cuts are in there. There's nothing comfortable about this. There is something necessary about this. This is the necessary right choice.

Ted Simons:
Yet the city of Phoenix would wind up having the second highest overall tax rate compared to other cities in the country. Again, how does an economy get started, get going when those kind of tax rates are being thrown around?

John Wright:
I don't think the tax rate is going to bury the economy. I'm not sure what the first largest city is, but I would bet New York City is right up there. New York City is not hurting the way Phoenix is now. They're a thriving city. They bring in business from all over the world. The sales tax in New York City doesn't seem to be driving people away.

Thayer Verschoor:
I think, Ted, I think that's another thing people will be concerned about. You're absolutely right. The Phoenix city council said we're going to raise tax on food 2 cents, unprecedented. That's going to happen. That's not a vote of the people. That's going to happen. That's going to happen right before the vote. You have several cities; my town of Gilbert has an 18% sales tax increase for the town that is going to be on the May 18th ballot. Of course last night we know that the Congress just passed down, there will be huge tax increases and people out there aren't sure. People are looking around and seeing, gosh, I'm getting hit on taxes in my town, from my state, from my federal government. I'm already overtaxed. I'm already spending half of my income on taxes and fees. So I think there's going to be a lot of resistance to actually saying well, I'm going to tax myself further when all of these other taxes are going on out there.

Ted Simons:
Do you have a response?

John Wright:
It's important to remember this is temporary. This is a temporary bridge to get out of the deficit. It's in the Constitution that it will sunset. It will sunset. It can't get spent by legislature. Do we have the right balance of taxes on property, equipment and income and wealth and sales and let's put together the right package.

Thayer Verschoor:
Ted, I don't think most people out there don't think it will be temporary because there will always be some important emergency just like the transportation tax that was supposed to sunset and prop 400 came eight years ago and we extended that to build light rail. There's always other good reasons to extend that tax. And so I don't think people believe that.

Ted Simons:
There are some people who believe that -- the more conservative members of the State Legislature, yourself included and those who are against this tax, aren't really all that upset that these services are going to be gone. That this is some sort of an attempt, an ideological attempt to dismantle government as it is into a new shape, into a new beast, if you will. Are they wrong?

Thayer Verschoor:
I think there's -- I think there's -- I think as we come to this point, that's a question we have to ask. What is the fundamental role of government? Can we do it more efficiently? Can we do it better? I think just as every company and every household out there has to look at when their income reduces, you know, do I need -- do I need -- do I need the 50-inch TV or will a 26-inch television do? Do I need the Cadillac or will, you know a more economical vehicle that gets me to work do? I think that's what we have to ask. What -- can we do things a lot more efficiently, and I think we can.

John Wright:
We're not talking 50-inch TVs and Cadillacs. We're talking about basic state services. We're talking about Constitutional obligations of the legislature. Is there an ideological agenda here? I think if you look at the language, there might be some. For other cuts in the budget, it doesn't say curtail or suspend. It says permanently eliminate. Permanently eliminate program in education and health care and social services.

Ted Simons:
But the analogy, we hear this analogy a lot. Household finances right now are hurting. They're cutting back. They're having to make ends meet. Why can't the state do that?

John Wright:
And some households are going out and finding a second job. Some households are trying to find additional money, starting entrepreneurial businesses on the side. Some households are trying to do the difficult balancing act. Parents are not going to stop feeding their children and Arizona should not stop educating their children.

Thayer Verschoor:
And raising taxes will make it difficult to keep that job or find a job. When people stop buying stuff, people lay off those employees that sell. When people stop buying stuff, they stop ordering stuff which means manufacturing is down. It's a whole cycle that we get into here. We need to reverse that cycle. You know, this tax -- this tax is just the first tax. If this tax passes, there will be other taxes that folks will ask for rather than reduce the spending in government and reduce the size of government. They'll try to grow it by using other taxes, and quite frankly, you've got several cities out there that will have double digit taxes.

Ted Simons:
Compare and contrast taxes and public services. Where do they balance with you?

Thayer Verschoor:
You know, I think public services you have to look at what's essential. You know protection, police, fire, those things that are essential, those things that are Constitutional. Education, John is right; education is a Constitutional mandate in our Constitution in this state. So I think the legislature has reflected that in the money that it's spent on education. If you look -- if you look at the total number of sales tax revenues coming into the state, it's about $6.3 billion for this year. Out of that 6.3 billion, about 4.6 billion of that is going to K-12 education. Another billion of that is going to university. That doesn't leave a lot left over for other things. I think we've reflected that and I think we'll continue to reflect that.

John Wright:
I think that's just an example that the 6.3 billion we're bringing in is insufficient and it's inadequate to meet the basic needs that the citizens of this state are getting. To reduce the quality of life and make us less attractive for businesses and families, we can't afford that loss.

Ted Simons:
We have all sorts of public safety groups. We have business groups; we have education leaders, lots of relatively heavy hitters, big names coming out in support of the tax. I'm guessing for the most part these are people that want to see Arizona succeed. They want to have Arizona's first in mind for this particular campaign. I'm guessing you feel the same way. Why are they, again, wrong in their idea? These are folks that stand to lose a lot if this tax goes through and the economy takes a dump.

Thayer Verschoor:
I think you just nailed it. These are folks that receive a lot of government money and they want to keep that money going. I think what we need to look at-- I mean, we've seen this over and over again. You know, you can keep throwing more money at the problem and it doesn't necessarily fix the problem. You need to look at things that are outcomes. You have groups that are out there, we talked about how much money is going to education, how much they're looking to lose, another 600 million. You have the hospital association. They're looking at losing a billion dollars. When you look at them, when you look at those choices, it's nothing for them to kick in 100 grand or 200 grand to --

John Wright:
I'm not sure how the Arizona chamber of commerce and industry is getting a whole lot of government money to spend. They believe this is good for business and industry in Arizona. When you have business groups representing a broad cross-section of our private sector, when you have individual businesses, greater Phoenix leadership, the leaders of some of the most successful private enterprises in Phoenix in Arizona, when you have that group coming together with the rest of us, I think that's a coalition representative of the state and representative of the state's needs.

Ted Simons:
We'll stop it right there. Great discussion. Thanks so much.

John Wright:
Thank you.

Thayer Verschoor:
My pleasure.