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Taxes

Voters Support Tax Hikes, Even in Arizona

Hit hard by recession, more states are raising taxes to pay for vital services

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— ColorBlind Images/Getty Images

A funny thing happened on the way to the Tea Party: A growing number of American voters have started to tell their political leaders they’d rather pay more taxes, not less—especially if the additional revenue will preserve important government services like schools and programs for seniors.

From Oregon to Kansas and from Maine to New Mexico, voters and their legislative leaders suddenly seem to be agreeing that tax hikes are essential even at a time when the great recession isn’t quite over.

“There are times when the public is ahead of the politicians, and this is one of those times,” said Jon Shure, deputy director of the state fiscal project for the Center on Budget and Policy Priorities, an independent think tank based in Washington. “When people are given the opportunity to support taxes to pay for important services, they agree to do it.”

In fiscal year 2010, 29 states enacted tax increases worth $23.9 billion, while nine cut taxes, according to the National Governors Association. Already for fiscal year 2011, which for most states begins on July 1, 18 states have proposed tax hikes, while nine sought decreases.

The need for new revenue at the state level is a direct consequence of the recession, analysts say. Rising unemployment means state governments receive less payroll tax and income tax. As property values fall, so does property tax revenue. And as households cut back on consumption to weather the economic storms, sales tax revenue declines as well. Meanwhile, those without jobs and income demand more state services to stay above water, and unlike the federal government, states can’t run deficits from year to year.

Arizona votes for tax hike

So imagine the surprise when voters in conservative Arizona, by an unexpectedly outsized margin, went to the polls last month and supported Proposition 100, which called for a significant tax increase to bolster state revenue.

By a 64 percent to 36 percent margin, they approved a temporary 1 percent sales tax hike—a referendum pushed by the state’s Republican governor after Arizona sold off its Capitol building, closed most of its state parks and privatized prisons in order to close a gaping budget hole.

The victory of Proposition 100 is perhaps the most dramatic indication of the public’s new willingness to pay more for government services. It means that the state’s sales tax will rise from 5.6 percent to 6.6 percent for a three-year period, adding an estimated $1 billion annually to strained state coffers.

Two-thirds of the money from Proposition 100 will go to primary and secondary education, with the remaining share allocated for public safety and health and human services.

“Doing the right thing almost always means doing the hard thing,” Arizona Gov. Jan Brewer told Reuters news agency after the vote. “We all know that in life. Tonight voters spoke out about what needed to be done and I’m glad they did.”

Opponents argued the measure was an excuse to keep government too big. “Arizona citizens and small businesses have been assured that Arizona’s grand canyon of a deficit won’t be balanced through expanding the sales tax to services and higher property and income taxes,” said Farrell Quinlan, Arizona director of the National Federation of Independent Business, in a statement. “Voters will be justified in feeling betrayed if these commitments are broken.”

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