Commenting on Arizona Governor Jan Brewer’s call for a tax hike to close Arizona’s $3 billion deficit, economist Byron Schlomach at the Goldwater Institute notes some interesting new research:
The Goldwater Institute commissioned the Beacon Hill Institute at Suffolk University in Massachusetts to model the consequences of a $1 billion tax increase. A $1 billion increase in the sales tax would cause the loss of 13,000 private jobs. Several thousand government jobs would be preserved, but the trade-off is about three private jobs lost for every government job preserved.
When the impact of spending reductions and tax increases are both accounted for, it looks like the surest way to “significantly worsen and lengthen” Arizona’s recession is to raise taxes.
As a recent transplant to Arizona, I really hope that Governor Brewer reconsiders her proposal given such evidence of the likely consequences. And never forget about our friends next door in California that keep shooting themselves in the foot with such folly.
Instead of a tax hike, the Governor should continue to explore the potential for selling and leasing state assets, scour state government for opportunities to streamline and privatize (as the proposed Council on Efficient Government would do…Phoenix was the first pioneer of managed competition, after all), and adopt a set of budget reforms to adopt outcome-based budgeting and demand agency performance.
And for targeted spending cuts, Byron’s ideas on closing Arizona’s budget deficit without raising taxes is well worth a read.