Byron Schlomach

Taxpayer handouts will not balance state budget or help economy

Posted on November 02, 2010 | Author: Byron Schlomach
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Arizona’s policymakers will face a huge challenge after today’s election results are tallied. The state’s structural budget deficit, or the amount that yearly spending exceeds yearly revenues, is in the neighborhood of $1.8 billion. That’s $720 a piece for the typical Arizona household. We’ve already seen record tax increases, mortgaged assets and every possible accounting gimmick to keep the state out of bankruptcy. But still, we’re deeply in the red.

So why is Governor Jan Brewer giving away $2.2 million of federal stimulus money to a new private laboratory that will conduct medical research? The federal money could have filled any number of budget gaps but was used instead to subsidize the health care industry, which makes up nearly a fifth of national gross domestic product. Clearly, this is not an industry on the brink of failure.

Policymakers must resist the temptation to dole out tax dollars to favored industries that offer a fanciful promise of more prosperity down the road. Our insecure fiscal situation holds back overall economic growth because businesses are uncertain about their future tax liability. The Tax Foundation recently ranked Arizona 34th out of 50 states for our business tax climate. The state’s ranking has fallen for two straight years due to tax increases. The Beacon Hill Institute ranks Arizona at 24th on their competitiveness index with our big structural deficit and poor bond rating helping to pull us down.

Politicians must get down to the business of reducing the size of government and making other fundamental reforms needed to put Arizona’s fiscal house in order. None of these should involve special interest giveaways and subsidies.

Dr. Byron Schlomach is an economist and director of the Center for Economic Prosperity at the Goldwater Institute.

Learn More:

Goldwater Institute: Budget Reduction Opportunities

Governor’s Office: Governor Jan Brewer Dedicates Funding to Advance Research into Major Diseases

Tax Foundation: 2011 State Business Tax Climate Index

Beacon Hill Institute: Tenth Annual State Competitiveness Report

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