The Anti-Robin Hood: AZGOP is picking our pockets

Posted: March 25, 2011 in AZ Assholes, Class Warfare, Disgusted in AZ, Lord of the Flies, The Economy

The Arizona House voted on and forwarded to the Senate a bill to change the state’s income tax rules.  The proposed bill, HB 2636, would set a flat income tax rate of 2.13% for all state residents and eliminate all deductions.  Studies indicate that the 12% of Arizonans that make over $100,000 per year will actually pay less in taxes and the rest of us–the great unwashed middle and lower classes will pay more.

The Goldwater Institute, a local conservative think tank (where very little actual thinking goes on), is supporting the bill because they believe it will stop the government from incentivizing how we spend our money.  I am not so sanguine about this reasoning and here’s why.  First, how does the government incentivize how we spend our money through taxes?  Well, if you live paycheck to paycheck, it doesn’t.  You’re spending money on your basic needs–food, shelter, transportation, health,  etc.  Things like braces for your kid have to be saved up for or it simply won’t happen.  It’s takes a lot of loose change to pay for braces and forget about paying for college for your kids.  If they don’t get scholarships, it will be loans or nothing.

Now, let’s look at people who actually have money left over after buying the necessaries and things that aren’t so necessary but sure are nice, like braces.  These kind of people can engage in discretionary spending.  Do taxes affect how they spend their money?  Absolutely.  The first thing they will be advised to do and what most people end up doing, is looking for some kind of tax sheltering.  Their initial reaction is to put that money some where that they can earn more money on it but not pay taxes.  If a person is wealthy enough, they will max out on the tax shelters available and still have money left over that needs to be put to some use, preferably making more money.  Usually they put their money into non-sheltered investments.  In most cases, money makes more money just by sitting in an account somewhere.

So what benefit does the flat tax offer these two groups?  For the wealthy, it simply means they’ll continue to invest their money but instead of tax sheltered accounts they might be more likely to invest in non-sheltered investments.  It won’t change any of the following tax systems though:  Federal income tax, state sales tax, any luxury taxes, property taxes, etc.  In essence, it gives them a tiny, little bit of room in Arizona to make different decisions.

For the poor that had no money to invest, no money to make more money, and no real choices about how to spend their money you can’t incentivize how they spend it.  The basic cost of living forces their spending habits, not choice.  Furthermore, this proposed bill would end up taking money desperately needed out of their pockets.  So the poor cannot be incentivized to spend their money differently by this bill.  Ultimately, this bill will take any choice they might have had about their spare change away from them.

This is why the argument made by the geniuses over at The Goldwater Institute is totally specious.  This flat tax bill is just another way the GOP is trying to redistribute wealth from the lower and middle classes to the wealthy and corporations.   When our country and our state is suffering from a record high deficit and an unemployment rate hovering around 9% that resulted from deregulation of the banking industry, the GOP wants to now add insult to injury.  The national GOP has reduced taxes for the wealthiest 1% nationally.  The AZ GOP has decreased corporate taxes, they’ve raised property taxes, and now they’re seeking to increase income taxes for 88% o f the population that can least afford it.  It’s just another in a long line of pocket picking by conservatives.

I would say call your state Senators to stop this travesty of a bill, but I think the die has been cast on this issue.

Sources:

http://www.abc15.com/dpp/news/state/senate-panel-oks-bill-to-flatten-arizona-income-tax

http://www.yumasun.com/opinion/tax-68602-proposed-flat.html

http://www.bensonnews-sun.com/articles/2011/03/24/opinion/letters/letter1.txt

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