Flat tax bill: Tax-averse Teapublicans propose raising taxes

Arizona’s Teapublican Legislature has been in session for nearly three full months and has done practically nothing about balancing the state’s budget, which has been illegally unbalanced for years now.

In recent days, the Arizona House started thinking about revenue generation; unfortunately, their latest proposal will increase taxes on the middle class and the poor. The House (which is generally a bit less wacky than the Senate, led by the infamous Russell Pearce) recently voted 40-18 to eliminate personal exemptions and standard deductions from the state income tax system. (Income tax deductions [ie, home mortgage interest, charitable contributions, college tuition, etc.] are used by most Americans to reduce their tax burden.) In addition, the measure would eliminate the state’s graduated income tax– which ranges from 2.59 to 4.54 percent– will be replaced by a flat tax of 2.08 percent.

I agree that Arizona’s tax system needs reform, but the Teapublicans– led by Rep. Steve Court (R-Mesa)– are going in the wrong direction.

If you’re bad at math, you may think that going from a range of 2.59 to 4.54 percent to a flat 2.08 percent is a good deal. After all, 2.08 percent is less than 2.59 percent. But, trust me, flat taxes are only a good deal for the wealthy. Graduated taxes are fairer because the percentage increases with the income. If anything, Arizona’s graduated income tax should have a few more upper income brackets, and instead of lowering corporate taxes (as the Legislature did a month ago) the corporate tax also should be graduated.

As Court points out in a Capitol Media Service article, this allows people living in poverty to pay no taxes. (Oh, the horror!) And Court thinks the poor should pay their fair share. Quoting the Arizona Daily Star, “Court said having everyone pay taxes also is good from a public-policy standpoint.”

Since Arizona’s recent corporate welfare legislation was a Republican rubber stamp, I’m sure Court voted with the right-wing majority to cut corporate taxes. Corporations use more services and resources than a family of four scraping by on $15,000 per year! Why do the Republicans pontificate about workers and the poor “paying their fair share” while letting corporations pay no taxes?

For more details on the flat tax, check out the Capitol Media story in the Arizona Daily Star.

Court’s proposal eliminates the personal exemptions and standard deductions, which together have, until now, resulted in some people owing no state taxes at all. Generally speaking, a couple with at least one dependent with a federal adjusted gross income of about $15,000 a year have been able to reduce their state tax liability to zero.

No more. And Court said that is by design, even though the federal poverty level for a family of three is $18,310 a year.

“They’re using state services,” he said. “And it’s a nominal amount.”

At $15,000, that 2.08 percent tax rate would compute to about $312 a year.

Court said having everyone pay taxes also is good from a public-policy standpoint.

“They would have greater interest in votes in the future that somebody’s proposing to raise taxes and now they’ll be affected,” he said.

Rep. Steve Farley, D-Tucson, said there is evidence that people across the income scale will be hit.

He cited a report prepared by Walter Dudley, a certified public accountant, who took the taxes of six different families and compared what they pay now versus what they would pay in the future. The incomes ranged from $17,784 to $248,456.

“What he discovered was every single one of those households saw their taxes increase under these rules,” Farley said, ranging from $370 more a year for the family at the lowest end to $5,274 in extra taxes for the family at the top.

“So if you’re voting for this bill, you’re voting for a massive tax increase on every household in the state of Arizona according to calculations,” Farley told other legislators.

Rep. John Kavanagh, R-Fountain Hills, said he dismissed Dudley’s conclusion as something that would be expected from accountants who figure to lose business with the change.

Ultimately, Court said, it comes down to a question of philosophy. He said there is no reason for those who are doing better to pay a higher percentage of their income to support government.

“With a flat tax, if you make 10 times more than I do, you’ll pay 10 times as much tax,” he said. “I’m just trying to get everybody back down to a level playing field.”

The measure now goes to the Senate.