hmmm..... Arizona's sales-tax rates are the fourth-highest in the nation

Survey: Most in Arizona would pass up tax cuts

Robbie Sherwood The Arizona Republic Jan. 6, 2006 12:00 AM

With a potential $850 million revenue surplus and an election right around the corner, Arizona's Republican-dominated Legislature is mobilizing for major property- and income-tax cuts this year.

But chatting over hamburgers at the Red Onion Restaurant in Heber, retirees Wes Vosburgh and Al Eubank say tax-cutting fever hasn't spread to their corner of the state. It's a surprising position given that both are ardent Republicans and fiscal conservatives and that support for tax cuts has been pretty much assumed among state GOP ranks for years. But they don't think it's a good idea two years after a recession that spurred $1 billion deficits.

"I'm against using that money for tax cuts because next year they are just going to want that money again," Eubank said of tax-cutting lawmakers. "What if you don't have a surplus to pay for it? I think they should pay up the emergency fund and drop a few bucks into the school system. No new programs and no permanent programs."

Vosburgh's and Eubank's caution falls in line with an Arizona Republic poll that said a strong majority of state voters would forgo a tax cut to either invest the surplus in public programs like all-day kindergarten and state employee pay raises or sock it away in case the economy tanks again.

Eubank, a former business owner, said the surplus should not go to any new programs, nor any new tax cuts, because the revenue may not be there in coming years to sustain them.

Vosburgh agreed, saying the economic downturn that led to $1 billion deficits in 2002 and 2003 is still too fresh a bad memory.

"I think we should use the surplus to retire debt or buy back bonds," Vosburgh said. "But I would not start any new programs. If you add new programs and you have another downturn, then you have funding problems."

One plan already on the legislative table, backed by the Free Enterprise Club, would cut state income taxes by $400 million. Under that plan, an individual with an adjusted income of $50,000 would pay about $117 less per year in income taxes.

The Republic poll asked Arizona voters if they could have their state income taxes cut by about $100 next year, would they take it? Or would they forgo it so lawmakers could either spend it on public programs like all-day kindergarten and raises for state employees or so the state could restore its "rainy day fund" and provide help during future economic downturns?

Only 28 percent of those polled said they would take the tax cut. Forty-two percent said they would forgo the cut to spend it on public programs, and 25 percent said they would give it up in order to prepare for the next economic downturn.

Pollsters interviewed 602 registered voters. The poll had a margin of error of plus or minus 4 percentage points.

Competing priorities There will be several competing priorities for surplus revenues when the legislative session begins Monday. There likely won't be enough money to do them all. The poll also asked respondents to rank five of the most likely possibilities in order of importance.

Voters gave the highest priority to education, especially the need to satisfy a federal court order to improve instruction for school students struggling to learn English, a job that could cost up to $180 million. Voters considered cutting taxes and giving raises to state employees important but ranked them behind education and restoring the state's $400 million "rainy day fund," which got depleted during the past recession.

Cari Nelson of Gilbert is a Republican who did fall in line with traditional GOP support for a tax cut. Nelson, who home-schools her four children, said "a part of me wouldn't trust" lawmakers with the extra money.

"I'd rather have it than see it go into a black hole where I wouldn't know what they'd do with it," the 35-year-old said.

But Melissa Barrett-Traister of Scottsdale, who didn't give her political affiliation, is with those who want to put the money into education. She specified higher education because she is a senior English-literature major at Arizona State University, where her tuition has gone up "$1,500 to $2,000" since she arrived.

"It is outrageous," Barrett-Traister said. "They need to put more money in education. My brother is in high school, and he's a musician, and they have really cut back the arts. It is not all about science and math."

Tax-cutting plans At least two major tax-cutting plans will be put before lawmakers this session.

One calls for permanent cuts in the state income tax; the other for zeroing out a statewide property tax that pays for education.

The income-tax proposal, which is being introduced by Rep. Laura Knaperek, R-Tempe, calls for a $400 million cut in the state income tax.

Arizona already has one of the lowest income taxes in the nation, according to the National Conference of State Legislatures. Arizona's sales-tax rates are the fourth-highest in the nation, while property taxes rank closer to the lower middle of the pack at 34th-highest.

The property-tax cut, which will be co-sponsored by Rep. Steve Huffman, R-Tucson, and Sen. Dean Martin, R-Phoenix, would add up to $200 million in savings. That would translate to $43 less in property taxes for anyone whose home was assessed at $100,000 and a bit more than $1,000 in savings for a business with property assessed at $1 million.

Some tax cutters argue that there is room to cut both income and property taxes, though most expect the two proposals to compete with each other and set off a debate over the merits of which tax cut is best.

But for Clara Engbaul, 80, of Gilbert, who describes herself as a staunch Republican, the surplus should be spread around to improve state services, not returned in a tax cut.

"I know a lot of people want a tax cut, but if we have a surplus, why not put it to good use?" Engbaul said.

Reporters Mary Jo Pitzl and Amanda J. Crawford contributed to this article.

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