The Arizona Legislature is on a self-described “hiatus” as lawmakers try to figure out a budget. The main sticking point is a proposed flat-tax that would greatly cut State revenue, which would greatly reduce “shared” revenue to Arizona municipalities. We talked about all this with Nick Ponder, of the Arizona League of Cities and Towns.
Ponder begins by saying, “…we’re actually against the impact that it has on local governments if the state were able to find a way to pass the flat tax proposal without having impact on local governments, then we would certainly be okay with the proposal and in fact not weigh in and or sign a neutral.”
The reasoning behind the Arizona league of cities and towns opposition is because, “in 1972. the voters passed a tax proposal that suggested that cities and towns couldn’t implement their own income tax, but in exchange for that streamline way of implementing taxes, the local governments would receive 15% of whatever the state collects. So with the state proposing to collect to cut taxes by $1.9 billion. That’s corresponding $285 million dollar per year, impacting on local governments. That represents about 30% of what local governments receive in income tax revenue so it has an impact on on your local budgets and how cities and towns would have to manage that gives us great concern with respect to cuts and services, or potentially increases in taxes which we do not want to do,” Ponder said.
The Arizona league of cities and towns looked into all the economic options for this flat tax to work but ultimately the organization, “contracted with noted economist here in Arizona, to try and identify what the potential benefits were to the flat tax proposal but also what the potential pitfalls were for local governments within that contract. The, the economist indicated that we would need to increase shared revenue, or the income tax revenue that cities and towns received to somewhere between 18.2 and 18.9%. In order for us to not have a negative impact,” Ponder said.