Sun, Aug. 18

Goddard wants Brewer to swear off future tax cuts for business if sales tax approved

PHOENIX -- Saying he fears a "shell game,' Attorney General Terry Goddard wants Gov. Jan Brewer to swear off future tax cuts for business if she wants voters to approve higher sales taxes.

Goddard, the likely Democratic nominee for governor, noted the one-cent increase in sales taxes that Brewer convinced lawmakers to put on the May 18 ballot would raise about $3 billion over its three-year life span.

At the same time, he pointed out the House already has approved a package of tax cuts to take effect in two years mostly aimed at reducing the burden on business. Legislative budget staffers have estimated that package, when fully implemented, would cut state revenues by $940 million a year when fully implemented.

"There are some people in the Legislature that would like to tax middle-income Arizonans with an increased sales tax and turn around and use that money to provide some special-interest breaks, some corporate tax cuts,' Goddard said. "That should not be tolerated.'

But Goddard did not come out in flat opposition to the tax hike. Instead he wants Brewer to assure him -- and the public -- that if they vote for the tax hike there won't be that kind of shift.

"I call upon you to pledge your veto to any non-targeted corporate tax giveaways that would appreciably offset the short-term revenue gains from Proposition 100,' Goddard wrote to the governor. "Arizonans deserve meaningful assurances from you that the increased revenues from your tax increase will truly benefit our schools, public health, and public safety.'

He's not likely to get that assurance.

In a speech to lawmakers a year ago -- the same one where she first proposed the temporary sales tax hike -- Brewer specifically said she wanted tax cuts that would kick in in 2012.

"We need to progressively build a more friendly tax code that attracts investment capital and helps create high-wage, sustainable jobs,' the governor said at the time.

And on Wednesday, Brewer campaign aide Doug Cole said she "has not changed her long-stated belief that job creation must be the top priority.'

The House-passed package would cut the state's corporate income tax rate, now close to 7 percent, by close to a third. Individual income taxes, which are computed on a sliding scale, would drop by 10 percent across the board.

The measure also would phase out the state property tax. And it would shift some of the burden of local property taxes from businesses to homeowners.

Goddard said there is nothing wrong with seeking to revamp the tax structure to promote economic development. But he said lawmakers need to revamp the entire tax code which he said is "riddled with loopholes' to benefit special interests.

His stance on the May 18 measure -- to the extent he has a firm position -- increasingly isolates Brewer and her politically risky stance of supporting higher taxes.

The three Republicans running against Brewer in the Republican primary all have taken positions against the tax hike. And even some of the legislators who voted to put the question on the ballot said they will campaign against it in hopes that will finally convince their colleagues that the only answer to the state's fiscal woes is deeper spending cuts.

The just-adopted $8.5 billion budget for the coming year includes more than $2.1 billion in new spending cuts. But it also is premised on voters approving the tax hike.

If the measure fails, the plan calls for an additional $428.6 million in cuts to K-12 education, $114 million taken from the Arizona Health Care Cost Containment System and $107.1 million from the state's three universities.

Goddard said the fact that there is a "contingency budget' for the coming year does not undermine his contention that the dollars that would come in from the tax hike still could replace other state revenues in future years, paving the way for the business tax cuts.