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Penny Sales Tax Increase on May 18 Election Ballot

Temporary tax hike would help cut estimated $2.6 billion deficit

Summary:
• Proposition 100 would raise state sales tax by a penny.
• Republican governor supports the temporary tax hike; GOP senators do not.
• Revenue from the penny hike would raise up to $1 billion.

A May 18 tax referendum has created strange fissures in Arizona politics. Proposition 100 would increase the state sales tax by one cent for the next three years.

Fronting the “Yes on 100” campaign, Republican Gov. Jan Brewer has been pushing hard for the temporary tax hike. In making it the signature issue of her administration, Brewer is butting heads with many leaders of her own party. State Treasurer Dean Martin, one of several primary challengers to the governor, calls it a “government bailout.” U.S. senators John McCain and Jon Kyl oppose it.

Brewer said this is the first time in her 28 years as a public official that she has backed a tax increase.

“I resisted—like everyone wants to resist—but there is no other way to solve this problem. If it doesn’t pass, Arizona will be into an eight- or 10-year recovery, instead of three or four,” Brewer said in an interview with the AARP Bulletin.

Arizona faces a budget deficit of at least $2.6 billion, worst in the nation as a percentage of the state budget. Revenue from the penny sales tax hike, estimated at $800 million to $1 billion, would cut the Arizona deficit by almost a third.

“If we don’t get this turned around, Arizona will be under water with all the services that it provides to the people, young and old,” Brewer said. “The 50-plus group, of which I am a member, is concerned about our state, the well-being of our economy, and the quality of life that we have here. Many of us have children and grandchildren, too, and we want to preserve their future.”

If approved, starting in June, two-thirds of the tax money would go to education and one-third to public safety, health and human services.

Susan Edwards, 62, a retired Phoenix financial planner, hates sales tax increases because they hit the poor and those on fixed incomes the hardest. But the Democrat is taking a longer-term view and voting for Proposition 100.

“Arizona needs to keep its schools funded to head-off a demographic calamity,” she said. “If young people learn only enough to make low wages, very little money is going to flow into Social Security and they won’t be paying much income tax either. As huge numbers of Arizonans hit retirement age, we really need a lot of young workers earning good incomes and paying forward into the system, so this is no time to disinvest in education.”

A longtime community volunteer, Edwards is now mentoring and housing an “at risk” teen. Through her, Edwards has seen today’s schools up close. “They are stretched to the limit now. If the legislature takes away even more, what will be left? Not enough.”

Randy Pullen, the Arizona Republican Party chairman, has also bowed to the necessity of a temporary infusion of tax revenue.

Timothy Schmaltz of Protecting Arizona’s Families Coalition (PAFCO), which advocates for children and older people, said he “reluctantly” supports the tax hike to keep schools and the social safety net intact—if shrunken.

Proposition 100 opponents, disappointed by the defection of some regular allies, argue that businesses and families are already struggling enough and can’t cope with higher sales taxes, even temporarily. The extra penny would set the sales tax at 6.6 cents on the dollar, or an 18 percent increase.

Sen. Thayer Verschoor, R-Gilbert, chairman of the “Ax the Tax” committee, said anyone who votes for the sales tax to avoid service cuts may be disappointed. “The sales tax would raise $900 million, but it is a $3 billion problem,” said Verschoor, who is also running for state treasurer.

Verschoor also said the tax would hurt small businesses, and he cited a conservative Goldwater Institute estimate that the tax would cut work hours or jobs for 14,000 to 16,000 Arizonans. Verschoor said the state must move beyond the kind of spending it had during Arizona’s boom years.

“We need to be living within the revenues we are bringing in, without a sales tax or more borrowing,” he said.

AARP Arizona is not taking a position for or against the sales tax hike. “It is a revenue source we like the least,” said Jay Hardenbrook, associate state director for advocacy. “But we also take the position that the state needs revenue.”

Maureen West is a Phoenix-based writer.

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