Impact of flat tax on Arizona families and students

During the previous administration with Governor Doug Ducey, Arizona’s legislature replaced the previous progressive income tax with a 2.5% flat tax for all families regardless of annual income.

Dave Wells, Research Director at the Grand Canyon Institute (GCI) joined “Arizona Horizon” to discuss how exactly this is impacting Arizona families.

GCI titled this issue “Pizza v. Porsches” to emphasize how approximately 70% of the benefits went to households with incomes above $200,000. GCI claims some of the families received enough money in tax cuts to buy a new Porsche annually. In contrast, the majority of Arizona’s taxpayers only received enough money to take their families out for pizza.

Wells said that the flat tax normally can’t be passed because wealthy people benefit much more than anyone else.

“Normally you can’t do a flat tax, because what happens is a flat tax means lower income taxes for wealthy people, and yet means you have to raise income taxes for everybody else,” Well said. “But we had a large surplus at the time, largely due to COVID dollars and the housing market going crazy, as well as the the stock market. And lawmakers didn’t realize that. That’s why they didn’t have a permanent surplus anyway. That why effectively, it happened.”

The flat tax’s $2 billion annual cost has had visible consequences and was a prime contributor to the budget deficits and cuts made during this legislative session.

University funding is also a large issue related to the flat tax according to Wells.

“It means that instead of wealthier people paying added taxes, the students at ASU are going to have to pay $350 more a semester. And that’s so basically we’re transferring costs because I mean the state has a systematically defunded universities,” Wells said.

Just this week, Arizona State University announced it would impose a $350 surcharge on the tuition price of every student next semester, effectively annexing the tax dollars that would have been paid by far wealthier taxpayers and making students and their families pay instead.