American Forum Op-Ed

ARIZONA EDITORIAL FORUM

By Dave Wells

Arizona has to decide whether it cares more about improving educational outcomes or cutting business taxes, because we can't have both.

On May 18th, voters in the state will be faced with a one cent temporary sales tax, the bulk of which will support public education. But passing that initiative will mean nothing, if Republicans in the state legislature continue to push a measure that purports to create jobs, but in actuality will undermine the state's economic future.

Arizona's Job Recovery Act says that problems in Arizona result from taxes being too high, especially our business taxes. It cuts corporate income taxes by 30 percent, makes it possible for multi-state corporations to lower their portion of profits taxed by Arizona, lowers the assessment on corporate property taxes, and eliminates the state equalization property tax.

After resistance to original plans that phased it in immediately, Republican leaders' latest proposal costs $60 million in fiscal year 2012 and expands to nearly $650 million by FY2018, even though the temporary sales tax, if approved by voters, will come off the books in FY2014 and the state projects a $2.5 billion structural shortfall for that year.

The math doesn't add up. We need to fix the state's structural financial problems first. The response to our current financial crisis has been huge cuts in state spending from social programs to K-12 and higher education that far exceed any new revenue brought in through the proposed temporary sales tax.

Next year my local school district will likely have no middle school librarians and will be cutting programs designed to remove disruptive students from classrooms
along with special programs for younger students struggling scholastically -- and that's assuming the statewide sales tax passes. They are considering these changes not because they think they're wise, but because the alternatives are worse. They certainly don't represent the best interests of children.

Since 1994, the state has reduced revenues through tax cuts by nearly $3 billion a year. Despite that history, we're frequently told that Arizona lags in business friendly tax rates.

In my recently released study "Corporate Tax Games: March to Madness or Economic Growth?" I found that the much referenced Tax Foundation's overall business tax state rankings, corporate income tax state rankings, and corporate property tax state rankings all failed to correlate with state rankings based on per capita personal income growth and average unemployment rates.

By contrast, educational outcomes make a difference. Two measures correlate strongly with economic growth: state rankings based on high school graduation rates and 8th grade reading and math scores on the National Assessment of Educational Progress, the only test which can be used to compare states well.

But doing better requires sustained and thoughtful investments in public education. Huge business tax cuts will help bankrupt the state, not lead a smart path for our economic future.

Wells holds a doctorate in Political Economy and Public Policy and teaches at Arizona State University. The views expressed are his own. The full study can be viewed at http://www.public.asu.edu/~wellsda/research/.

Copyright © 2010 by the Arizona Editorial Forum. 4/10