The untold story about Arizona’s immigration law is that it greased the skids for a tax increase in 2010. Two years ago, Arizona Gov. Jan Brewer was campaigning for a one point, 18%, sales tax increase in the middle of a recession and was facing a host of well-funded and credible primary challengers. Then Brewer signed the now famous immigration bill, SB 1070 (a bill that originally she did not even want sent to her desk), and overnight her approval rating skyrocketed, along with support for the sales tax hike that she staked her reelection campaign on.
While the sales tax increase ended up passing, ATR warned at the time that “temporary” tax increases tend to be not-so-temporary and there would be an effort to extend the rate hike before it expires on May 31st, 2013. And not surprisingly a group is in the process of filing paper work to do just that.
The best thing for the Arizona economy would be to let the increased rate sunset as scheduled. Increased sales taxes disproportionately impact small businesses. As a state that bore the brunt of the burst housing bubble and is struggling through a tepid recovery, the last thing Arizona needs is for small businesses, the engine of job creation, to be hit with a continuation of the Brewer sales tax hike. ATR president Grover Norquist recently noted in California’s Flash Report the disproportionate effect that higher sales taxes have on small businesses.
“PricewaterhouseCoopers conducted a 2004 survey that was the first national measure of retailers’ sales tax compliance costs. The report found that retailers with less than $1,000,000 in annual sales were burdened with sales tax compliance costs in excess of 13 percent. Meanwhile, retailers with income between $1,000,000 and $10,000,000 saw average compliance costs less than six percent and retailers with more than $10,000,000 in sales had compliance costs that were less than three percent on average.”
While an extension of the Brewer tax hike would be misguided at any time, it would be even more harmful in light of the fact that the largest federal tax increase in U.S. history will hit individuals, families, and employers in Arizona in less than 10 months. The changes scheduled to take effect on January 1st, 2013 include higher income tax rates, higher taxes on marriage and family, a middle class death tax, higher tax rates on savers and investors, employer tax hikes, and twenty new or higher taxes in ObamaCare alone. In less than 30 days, the U.S. will have the highest corporate tax rate in the world.
Arizona’s state & local tax burden jumped from 9th to 3rd highest in the country as a result of the Brewer tax hike. It’s time to let it expire, as Gov. Brewer herself said it should.
What do you think, will Gov. Brewer keep her word and vocally oppose efforts to extend the sales tax increase? Time will tell.