House Democrats' Tax Increase Would Grow Unemployment Rolls

Posted on March 31, 2009 | Type: Press Release
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Phoenix--Yesterday the Arizona House Democrats released a plan to raise the income tax, property taxes, and levy a new tax on utility bills to close the budget deficit.

An analysis commissioned by the Goldwater Institute and performed by the Beacon Hill Institute at Suffolk University in Boston, Massachusetts, examined the effects of an income tax increase, a utility tax, and the reinstatement of the state equalization property tax on employment, state economic output, and income. (Yesterday the Goldwater Institute released findings from Beacon Hill that showed a sales tax increase would cause the state to lose 14,400 private sector jobs.)

The plan would raise income taxes on families earning more than $250,000 per year. While Beacon Hill did not examine a tax increase only on certain families, it did show that an income tax increase would have larger negative impacts on the economy than sales taxes. The analysis shows a $1 billion increase in Arizona income taxes would eliminate more than 26,000 private jobs. The state's economic output would shrink by $1.6 billion, and after-tax income would fall by $1.5 billion, about $500 per household. 

The proposal also includes reviving the $250 million state equalization property tax. Beacon Hill's estimates show this tax increase will reduce the state's economic output by $498 million, eliminate 3,800 private jobs, and cut after-tax income by $385 million.

The plan would also impose a new tax on utility bills. Taxing electricity is a direct burden on economic growth because it makes it more expensive for businesses to operate and expand. This tax has the worst effect on economic output of all taxes considered, causing the state to lose $1.9 billion in output. It would also cause the loss of 13,400 jobs and $1.4 billion in after-tax income.

To close the budget deficit, the Goldwater Institute has recommended reducing spending and structurally reforming the way we fund k-12 and higher education and healthcare.

The Goldwater Institute is a nonprofit public policy research and litigation organization whose work is made possible by the generosity of its supporters.

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