Cook says Ducey’s theory for $1.5B tax cut faulty, could hurt cities

Rep. David Cook said the only reason Arizona has $1 billion in its “rainy-day fund” is because it put off for years making necessary repairs to state buildings.

By Howard Fischer | Capitol Media Services 

The bid by Gov. Doug Ducey to permanently cut $1.5 billion a year of state revenues is based on an economic theory and a set of numbers that may not hold up under closer examination.

And all that is worrying Arizona cities who stand to lose hundreds of millions of dollars if the governor is wrong.

C.J. Karamargin, the governor’s press aide, said the way his boss figures it, enacting what he has billed as “the largest tax cut in Arizona history” will provide an economic stimulus that will keep Arizona competitive in landing new companies and getting firms to expand here. And Daniel Scarpinato, Ducey’s chief of staff, said the situation here is different than when Kansas tried this a decade ago, only to find its economy in a shambles.

Economic theory aside, Karamargin said there’s another reason Ducey can propose a flat tax: a 2019 state law that requires online retailers to start collecting sales tax on purchases made by Arizona residents. Karamargin said that alone will produce an estimated $514 million a year by the 2026 fiscal year.

And that doesn’t count what cities collect in their own sales taxes.

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