Some Republican Gubernatorial Hopefuls in Arizona call for Elimination of State Income and Corporate Taxes – Governor Brewer is less than Supportive

Arizona governor Jan Brewer recently announced that she will not be running again in 2014 due to term limits. Arizona law prohibits governors from serving more than two consecutive four year terms. Brewer took over as governor in 2009, when former Governor Janet Napolitano left office to join the Obama administration as Secretary of Homeland Security. Subsequently, her first term fell short of four years. The governor could have mounted a legal challenge to seek another term, but she opted to leave the State House at the end of the year instead.

With State Senator Al Marvin now withdrawing from the race , citing a lack of funds, there are now six candidates who will be running in the August 26 Republican primary. While their positions differ widely on a variety of issues including taxes, regulations, Common Core education standards and Medicare expansion, two of the remaining candidates, Arizona Secretary of State Ken Bennett and former businessman Doug Ducey have each stated that if elected, they would incrementally do away with the state income tax and, in the case of Bennett,  corporate taxes as well.

Based on documented evidence cited in the books How Money Walks, and Wealth of States, their proposals make sense. After all, other Republican-led “red” states with low to no state income or corporate taxes, along with favorable business regulations, have seen major gains in migrated wealth coming from high tax “blue” states. The results are the expansion of the tax base from new and relocated businesses, and hence more jobs and economic growth. Their plan for making up any revenue shortfall is through implementing a more broad based sales tax. In other words, they recommend an increase in the sales tax, coupled with expansion of taxes on goods and services formerly exempt. In essence, a consumption based tax revenue stream.

The Grand Canyon State has no state property tax (though localities can impose one). Income taxes range from 2.6 percent to a top rate of 4.5 percent. Sales taxes are also relatively low at 5.6 percent, earning Arizona fifth place among Kiplinger’s top ten most tax-friendly states.

Governor Brewer is clearly not on board with the plan, stating that she “does not believe it would work in the state of Arizona.” She does not believe that the lost revenue can be made up through sales taxes, or even an improved business climate. Revenue from income and corporate taxes make up $4.4 billion of the state’s $9.2 billion budget.

The governor feels that her administration has already laid out a positive plan for the future of Arizona. Her plan already includes tax cuts and reduced regulations. It also includes a 30 percent reduction in corporate income taxes now being phased in.

Prior to Governor Brewer, the state has had a long history of Democratic governors. In order for the state to hopefully remain in the Republican column, securing the endorsement of the governor would be a major plus for the chosen candidate. But she has made something very clear; before she endorses any potential successor she must be convinced that their intent is to continue with the policies she has initiated.