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.
But here’s the thing: Amazon, arguably the largest of these online retailers, actually agreed to begin collecting Arizona’s sales tax as far back in 2012 to settle a lawsuit with the state. And large companies like Wal-Mart also were collecting and paying sales taxes on both what they sold in their stores and what was delivered directly to customers.
Until last year, however, those revenues were included in regular sales tax proceeds.
It is only now that state tax collectors lump these into a special category of its own, cash the governor considers “new” money.
That accounting has raised concerns.
