The Journal notes the following:
• “Most economic studies agree that states have more jobs and higher income growth when they tax consumption rather than savings, investment and business profits. This explains why most of the nine states with no income tax at all—such as Texas, Florida and Tennessee—have been economic high-flyers in recent decades.”
• “Ms. Brewer’s proposal reflects this economic logic. Effective January 1, 2011, her plan would reduce the state’s corporate income tax rate to 4.86% from 6.97%, which would be one of the largest business tax cuts in the nation in recent years. The proposal also cuts all personal income tax rates by 6.6%, thus lowering the top marginal rate to 4.24% from 4.54%. A hated statewide tax on commercial and residential property would also be abolished.”
• “We’d rather see the legislature cut more spending than raise the sales tax, but on the other hand the sales tax would only take effect if it is approved on the November ballot. The political class is giving voters a say in the matter. The sales tax increase also has the advantage of a built-in expiration date, while the tax cuts are permanent.”
• “Small employers also benefit from the lower property tax rates and the personal income tax reductions. Lower tax payments will enable them to reinvest more in their enterprises.”
Read the full piece here.
The Journal is right on the mark about taxing consumption versus savings, investment and profits; about spending cuts being better, but this being a second best course of action; and about the impact on small business. State legislators would be wise to pass this package, which would make Arizona a far more competitive place to live, work, invest and start up and run a business.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
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