Arizona Republican's Fiscal Irresponsibility

Jun 28

Republicans claim they're the party of fiscal responsibility at the federal and state levels. The reality is much further than the truth today. I will only talk about the fiscal irresponsibility of Republicans in the Arizona Legislature. The state will face a budget crunch within the next year or two because of policies that Republicans in the Legislature adopted.

Tax Cuts and More Tax Cuts

Arizona has cut individual income taxes by about 2 billion dollars within the last year. The top marginal personal income tax rate was reduced from 4.50% to 2.98% last year and will be converted into a 2.50% flat tax next year. Since the tax cuts were enacted, Arizona’s personal Income Tax revenue has declined by 29.4%, so the tax cuts did not pay for themselves. Tax cuts are not the magic pill to economic growth; as claimed by conservatives, states with higher taxes often have higher GDP per capita. Tax cuts can be, in some cases, counterproductive, like what happened in Kanas between 2013 and 2017. In Kansas, lawmakers cut individual income taxes by 30% and eliminated some business taxes. As a result, the state's budget fell into negative territory and caused massive budget cuts and a downgrade in the state's credit rating twice. Because Arizona has cut taxes so much, we have less money available to invest in things that will create economic growth in the long term and will be facing a dire fiscal situation soon.

The Universal Voucher Scam

Arizona Republicans have created universal eligibility for school vouchers. It was projected to cost $65 million in fy24, but the actual cost is closer to $900 million. Republicans will argue that it gives parents a choice and allows for academic improvement. The reality is that most parents choose public education that has been underfunded for a long time. There is currently little evidence to suggest that school vouchers improve academic performance. Despite the high cost and lack of accountability, republicans in the legislature want public dollars in private schools instead of public dollars in public schools.

Conclusion The Coming Fiscal Storm

Arizona had a $2.5 Billion surplus last year, but that will be short-lived. If it were not for the carryover and covid funds, which will run out very soon, Arizona would face a deficit of about $2 Billion, and the JLBC projections in the following years look bleak. It's worth noting that tax revenues for FY23 came in $175 million below forecast. So Arizona will have trouble getting its fiscal house in order and will be facing significant deficits, and you can thank Republicans in the Legislature for that.