Arizona Raises Taxes – Could California be Next?

Loren Kaye
President of the California Foundation for Commerce and Education

Voters in Arizona agreed to increase their sales tax by one cent for three years. And it wasn’t close - 64 percent of voters approved the measure, running away in 14 of 15 counties.

Are we witnessing a tax-friendly trend by voters in western states, as some have observed? After all, just last January, voters in Oregon also approved tax
increases. But Oregon is, as Jean Ross paints it, "a blue-green state,"
while Arizona’s leanings are crimson-red. And Arizonans increased the
broad-based sales tax, which comes out of everybody’s pocket, while
Oregonians increased the burden on the reviled upper income and
corporate taxpayers.

So what do the Oregon and Arizona efforts have in common? Most obvious
is campaign financing: Oregon government unions outspent taxpayers
by about 1.5 to one; they poured into the Oregon campaign what in
California would have been the equivalent of a sixty million dollar
effort.

In Arizona, the Yes on 100 effort raised more than $2 million, compared with
$1,200 by opponents. Campaign supporters in Arizona were broad based –
including businesses and individuals, in addition to government unions.
And the Arizona tax increase focused on supporting schools and were in
addition to – not an alternative to – deep budget cuts.

So do election results in neighboring states signal that Californians’
revulsion with tax increases may be ebbing? After all, California
voters a year ago rejected continuation of temporary tax increases by a nearly two-to-one drubbing.

The answer very likely is still "no." The most recent survey of voters by the Public Policy Institute of California showed that the governor’s approval rating has reached a new low and
legislative ratings remain near record lows. Voters won’t trust elected
officials they loathe to wisely steward new taxes. And when asked about
the budget deficit, only eight percent of voters agreed it should be
solved mostly by raising taxes, while 41 percent said it should be
solved mostly with spending cuts, and 42 percent supported a mix of
spending cuts and tax increases. These ratios have remained remarkably
consistent over the past two years.

Voters continue to express skepticism about increasing broad-based
taxes, such as the car tax (32 percent favor increasing) or sales tax
on services (35 percent favor increasing). Higher pluralities favor
taxing the wealthy and corporations (62 percent and 51 percent,
respectively), but support even for these taxes has dropped over the
past two years.

In November, Californians will likely be offered an opportunity to test
this hypothesis. The California Teachers Association is sponsoring a
ballot measure

that combines one of the least popular tax targets – corporations –
with one of the most popular spending causes – education. Then we’ll
know if this is a trend.

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