A strong economy is a key piece of the foundation for any society. But while the Biden administration has been busy doing anything it can to destroy the economic climate in America over the past four years, Arizona is set up for success—not just for today, but for decades to come.
Last month, the American Legislative Exchange Council (ALEC) released its latest “Rich States, Poor States” report, and the Grand Canyon State received the number three ranking for economic outlook among all 50 states. Such a high rank is impressive enough on its own, but when you consider that our state was ranked 13 back in 2021, Arizona’s dramatic rise up the chart especially shines. So, how did we get here?
Pro-Growth Policies Have Led the Way
Arizona’s high ranking is a direct result of significant pro-growth income and property tax reform that have supercharged our economy. In just the last decade, we have cut taxes on capital gains and drastically reduced the property tax burden on small businesses. Then, in July 2021, the Free Enterprise Club helped lead the charge as the Republican-led legislature passed a 2.5% flat tax, delivering historic tax cuts for every single Arizona taxpayer. And if that wasn’t enough, Republicans also included tax relief for Arizona’s families in last year’s state budget to help with the growing cost of gas, groceries, housing, and energy under the Biden administration.
Each of these pro-growth policies have set up Arizona as a leader in the country with many other states looking to mirror these reforms, but if the left had gotten its way, we never would have been here.
For the Democrats and their sycophant media allies, the problem is always too much parental choice in education and letting taxpayers keep more of their hard-earned money. Yet this narrative couldn’t be further from the truth. A closer look at Arizona’s budget and the projected budget deficit reveals that we have a spending problem, not a revenue problem…
Projected Budget Shortfall Is a Spending Problem
Just 5 years ago, the legislature enacted the FY 2019 budget that included $10.1 billion in on-going spending, plus $500M in “one-time” expenditures ($10.7 billion total). By last year, that number had exploded to nearly $15 Billion in ongoing spending, a 50% growth in ongoing spending in 5 years! The most recent budget negotiated with Democrat Katie Hobbs earlier this year kept ongoing spending at a lower trajectory but included “one-time” outlays that brought the total budget cost to $17.8B…
On Wednesday, October 11, Arizonans learned the budget Katie Hobbs signed into law will possibly have a $400 million shortfall. This means the state won’t have enough money to fund the budget because it’s too big and is spending too much money.
The left wants to blame the budget shortfall on the implementation of former Governor Ducey’s state income flat tax a couple years ago. They also demonize the families participating in the state school choice ESA program. However, if it weren’t for Hobbs’ spending increase of $2 billion and vetoing a $2 billion smaller budget, the state would still have an outlook with a budget surplus.
Let’s review the short history.
In June of 2022, Arizona Governor Ducey signed into law the Fiscal Year 2023 Arizona Budget. The Radical Left and then-Secretary of State Katie Hobbs praised that budget for being bipartisan.
Moving ahead to the most recent 2023 legislative session, Arizona Senate President Warren Petersen and Speaker of the House Ben Toma wanted the new legislature to prioritize their most important responsibility — the state budget. Accordingly, in February, the state legislature passed a continuation of the same $15.8 billion budget from 2022.
Hobbs vetoed it. The budget Hobbs vetoed is the same as the one she applauded after Ducey signed it into law. This year, Hobbs called the budget partisan and extreme. The budget Hobbs decided was good enough to sign into law was $17.8 billion, exactly $2 billion larger than the budget she vetoed.
Hobbs insisted on a budget that is $2 billion larger even while many economists predicted Arizona and the nation are at risk for an economic slowdown due to rising interest rates. Forbes reported, “At the end of 2022, the National Association of Realtors predicted a 15.8% drop in combined sales and prices for the Phoenix-Mesa-Scottsdale [housing] market in 2023.”
The Federal Reserve, the nation’s central bank, currently shows the median home price in the United States is collapsing faster than any other point in recorded history.
If a recession occurs, Arizona will see less tax revenue. This would also have a negative impact on the budget’s revenue because people are spending less money; therefore, the state is collecting less in taxes.
While the Radical Left wants to blame the budgetary shortfall on the flat tax that benefits everyone, one thing is clear. The state of Arizona is spending too much money, and Hobbs’ extra $2 billion budget is destroying Arizona. It is her fault.
Jeff Caldwell currently helps with operations at EZAZ.org. He is also a Precinct Captain, State Committeeman, and Precinct Committeeman in Legislative District 2. Jeff is a huge baseball fan who enjoys camping and exploring new, tasty restaurants! You can follow him on X here.
In just a few short months, Arizona will officially have the lowest flat income tax rate in the country. Governor Ducey announced last week that the Department of Revenue will be implementing the final stage of individual income tax rate and bracket reductions to a single 2.5% flat rate in 2023, a year sooner than originally planned. This is great news for Arizona taxpayers and job creators as well as the overall economic outlook of the state for years to come.
Given what is coming out of Washington, D.C. these days, this news couldn’t have come at a better time…
Arizona will have just one personal income tax rate of 2.5 percent instead of four rates as of Jan. 1, Gov. Doug Ducey announced last week. That is an effective date one year sooner than was originally expected when the governor signed legislation in 2021 for what was designed as a three-year phase in.
“It’s time to deliver lasting tax relief to Arizona families and small businesses so they can keep more of their hard-earned money,” Ducey wrote to Arizona Department of Revenue Director Robert Woods on Sept. 29. “This tax relief keeps Arizona competitive and preserves our reputation as a jobs magnet and generator of opportunity.”
It is Arizona’s thriving economy and record revenues which allows for full implementation of the flat tax now instead of January 2024, according to Ducey. The Joint Legislative Budget Committee and the Governor’s Office of Strategic Planning and Budgeting jointly informed the governor last week that Arizona’s General Fund revenues, excluding the beginning balance for Fiscal Year 2022, were at $16.7 billion.
This exceeded the statutory economic condition phase-in triggers written into the flat tax law in 2021. In addition, Arizona’s Rainy Day Fund is at its highest level ($1.4 billion) in state history and economists are forecasting Arizona will report at least a $4 billion budget surplus through 2024.
“It’s no secret that Arizona’s economy is booming,” Ducey added in his letter to Woods. “Over the last eight years, we’ve made responsible decisions to live within our means, reduce burdensome government regulations, lower taxes every year and ensure our state remains a great place to live.”
Arizona House Majority Leader Ben Toma was instrumental in getting personal income tax reform passed during the 2021 legislative session to eventually replace the state’s four-rate system of 2.59 to 4.5 percent with the 2.5 percent flat rate.
“I am happy to report that revenue thresholds have been exceeded one full year in advance, enabling the implementation of a single flat rate of 2.5% a year earlier, providing Arizonans with significant economic relief when they need it most,” he said in response to the governor’s announcement.
Several business groups and economic development organizations lauded the news, which will give Arizona the lowest flat tax in the country when it takes effect Jan. 1.
Americans For Prosperity – Arizona:
“This is a historic win for Arizona that couldn’t come at a better time,” said State Director Stephen Shadegg of AFP-Arizona. “Over time, Arizonans will continue to reap the benefits of more tax relief and the state will become even more attractive to businesses and investors, growing the state’s economy while letting hardworking taxpayers keep more of their paychecks.”
Common Sense Institute Arizona, a non-partisan research organization dedicated to the protection and promotion of Arizona’s economy:
Gov. @DougDucey on Day 1 of his campaign promised to reduce the state income tax to as close to zero as possible. Now, 8 years later – and a year ahead of schedule – Arizona will officially have the lowest flat tax in the nation when we ring in 2023. https://t.co/0Ri6vYUhgA
