Thursday, April 14, 2016

An economic lesson never learned: You cannot spend hope

Headline in this morning's Daily Star

"State's corporate tax cuts not proving to be economic stimulus"

Quotes from State Sen. Don Shooter

The tax cuts were promoted as an incentive to get corporations and their high-paying jobs to move to Arizona.

That was certainly the hope when they were enacted,” said Sen. Don Shooter, R-Yuma. Shooter told Capitol Media Services the numbers released Wednesday underline what he is now preaching as chairman of the Senate Appropriations Committee.

“Let’s stop tinkering with stuff, including the income side of the equation,” he said.

His remarks come as Gov. Doug Ducey on Wednesday repeated his 2014 campaign promise to lower taxes every year he is governor.

Frank Sinatra on Ducey's promise

But he's got high hopes, he's got high hopes
He's got high apple pie, in the sky hopes

What lies ahead for Arizona

Here are the revenue projections; the accompanying chart compares the projections assuming no corporate tax cuts to the projections assuming the cuts already enacted. (Source: Joint Legislative Budget Committee; projections from state Finance Advisory Committee; Daily Star)

You don't have to be a rocket scientist (or economist) to figure out where the state is headed if those projections are realized. Ducey will get his wish around 2024. All there will be to spend by then are "high hopes."

High hopes never helped those in need. But that is a lesson Arizona will learn the hard way.

P. S.

Here are Steve Farley's observations on the looming fiscal cliff (Farley Report #248, 4-13-16).

Today the Finance Advisory Committee, a group of the state’s top economists, predicted weak revenue growth in the next three years. The reason? A dive in corporate income taxes of nearly a billion dollars between now and FY19 from the full phase-in of corporate tax cuts enacted several years ago. I’ve not seen any evidence that this investment of taxpayer money has returned any positive results in job or wage growth for the rest of us. Remember this fact when the current majority try to tell you that there just isn’t enough money to pay for our public schools, community colleges, transportation system, child safety, or universities.

 

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