Saturday, May 16, 2015

Who is behind study claiming crAZy can do without income tax?

Do I really have to ask? Here is a story from The Republic along with some "follow the money" facts.

Let's start with who.

Stephen Slivinski, author of the report, contends that Arizona's personal income tax could be eliminated, as Gov. Doug Ducey has proposed, over a multiyear period if lawmakers keep general-fund growth to no more than 2.3 percent yearly and assuming overall tax revenues grow close to their long-term average.

Slivinski, a former senior economist at the Goldwater Institute ...

OK, got it. This guy is a conservative economist doing Il Duce's work. With the cover of an academic appointment at ASU.

Next look at the what. Slivinski wants to eliminate state income tax which accounts for $3.75 billion in revenue. That, folks, is one very large piece of deficit. How does that get covered? By increasing the sales tax from 5.6% to 6.6%. (Remember, if you will, how Il Duce was opposed to increasing the sales tax for education?) So the essence of the proposal is to get rid of a progressive tax in favor of a regressive tax. Another ASU economics professor is not so enamored of this game.

Dennis Hoffman, an economics professor at ASU's W.P. Carey School of Business who was not involved in the study, praised the report for laying out various options but said he didn't think eliminating individual income taxes would trigger a major economic transformation of the state.

"I'm skeptical that we could dramatically change our growth trajectory" by eliminating personal income taxes, Hoffman said, noting that various other states including California, Colorado and Utah are faring just as well or better yet with higher income-tax rates. "The economic evidence for states without an income tax is mixed," he said.

Hoffman also noted that Arizona's income tax is progressive, with a small slice of the population paying a big share of taxes. This implies that its elimination could heighten concerns about the widening rich-poor gap. Also, he noted, the 2.3 percent government spending target envisioned in the study might not be realistic if inflation accelerates or if Arizona attracts a lot more newcomers, who would increase demand for government services.

Further, Hoffman said individual income-tax revenue in 2015 is projected at $3.75 billion, which would mean an even bigger funding gap to close if this revenue source were eliminated.

Finally, who is paying for this study? To his credit, the author of The Republic story does follow the money.

The ASU Center for the Study of Economic Liberty, also housed at the W.P. Carey School of Business, was established in 2014 with the help of $5 million in gifts. Part of the money came through a grant from the W. P. Carey Foundation, which supports schools and universities in the areas of business and economics. The organization's founder, the late investor Wm. Polk Carey and founder of W. P. Carey & Co., also provided a $50 million gift to ASU in 2003 that resulted in the renaming of the business school.

The W. P. Carey Foundation helped to secure up to $3.5 million for the new center from the Charles Koch Foundation, which focuses its philanthropy on university research and education to advance understanding of how free societies improve the well-being of people around the world.

And, apparently, provides support for academics to sell Koch-a-cola.

UPDATE: One Republic reader not buying the Koch brothers line. Here is the letter.

Re: "How eliminating personal income tax in 3 steps will help Arizona," Thursday My turn by Stephen Slivinsky.

Sounds too good to be true, because it is not true. Slivinsky slides over the detail of how this is achieved: cut revenue spending, a temporary sales tax, allowing cities to levy local taxes (sales tax, since income tax would be forbidden).

We have already seen the burden tax cuts have made to our educational system. Larger classrooms, higher tuition for college students, which is passed onto middle-class parents. Ultimately the poor and the middle class would be burdened with higher taxes and the only group that would benefit would be the higher-income tax brackets.

Eliminating income taxes is ultimately a transferring of tax responsibility to those who can least afford it. If I didn't know better, I would have thought the article was written by a politician.

It was.

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