Desperate economic times call for desperate measures in Arizona, but experts said a legal loophole could allow lawmakers to cover the deficit without making severe cuts to state programs.
Politicians at the Arizona Capitol are still mulling over a report released last Friday by a team of economists from the three state universities, known as the Fiscal Alternatives Choices Team, or FACT for short, that suggests taking advantage of the supposed loophole.
The Arizona Constitution states a tax increase must be approved by two-thirds of the state Legislature. The FACT report, however, suggests bypassing this law by writing a bill that would temporarily increase taxes and then permanently cut them after five years. This would amount to a “net tax decrease” that only needs to pass by a simple majority.
“It’s possible that if you structure a bill so there’s a tax increase in the early years but that’s offset by a decrease in later years, you wouldn’t need a two-thirds majority [for approval],” said W. P. Carey School of Business economist Tom Rex.
With the overwhelming majority of conservatives in the Legislature opposed to a tax increase, this may be the only way to avoid devastating cuts to education and health care, Rex said.
Rex worked on the report with economists from the other state universities, and the group came up with a series of proposals, both short- and long-term, to help improve the state’s economy. The temporary tax increase is drawing the most attention. Critics say the proposal is unconstitutional, while advocates laud it as an alternative to massive, damaging cuts in state funding.
Paul Senseman, director of communications in Gov. Jan Brewer’s office, praised the plan as a viable alternative to making massive cuts or calling for a special election to ask voters for a temporary tax increase, a proposal Brewer made early last month.
The proposal presented in the report could give the governor an avenue to pass such an increase, Senseman said. He added that the governor’s office is confident the measure is within the bounds of the state Constitution.
“It is one of many options we are considering,” Senseman said. “The governor’s office has never questioned the legality of [the measure].”
Critics say that confidence is misplaced. Rep. John Kavanaugh, R-Fountain Hills, who chairs the House Appropriations Committee, said such a measure would not even be able to pass by a simple majority in the mostly conservative Legislature.
“You’re not going to get the votes to [raise taxes] at this Legislature,” Kavanaugh said. “I don’t think the majority of [lawmakers] want to increase taxes.”
Professor Paul Bender, who teaches a course on Arizona Constitutional law at the University, said the proposal is unconstitutional. Any measure that proposes a tax increase, whether or not it is accompanied by a long-term decrease, needs a two-thirds majority to pass, Bender said.
“The proposal would result in an increase for several years,” Bender wrote in an e-mail. “That would trigger the two-thirds requirement. The fact that they would have to pay less at some time in the future wouldn’t mean that they weren’t required to pay more now.”
Reach the reporter at derek.quizon@asu.edu.
