Update: ATR Says HB2015 is Still Pledge-Compliant

There were some concerns last night that HB2015, the tax package included in the budget deal, would in fact violate Americans for Tax Reform’s Taxpayer Protection Pledge. Following a flurry of late-night emails and phone calls, ATR confirmed this afternoon that HB2015 does not violate the pledge. ATR advises that there are a number of moving parts that could change the Pledge implications of any potential budget agreement.

The tax package includes:

The repeal of the state equalization tax ($250 million annually)

Personal income tax cuts (6.6% across-the-board) that begin in calendar year 2011 ($200 million annually)

Corporate income tax cuts (30% reduction) that begin in calendar year 2011 ($200 million annually)

Refers to the ballot a temporary suspension of the limitation of the legislature’s power to appropriate or divert funds from voter-approved initiative. This section is repealed on July 1, 2013.

Refers to the ballot a temporary sales tax increase and a spending cap of $10.2 billion for 3 years. In the first 24 months the tax goes from 5.6 to 6.6%. In the last 12 months it goes from 6.6 to 6.1%. It is repealed July 1, 2013.

Again, the Club opposes the sales tax, but the trade-off for the above tax cuts is worth the risk of referring it to the ballot. These significant tax cuts will not only help Arizona rebound from the current recession, they will benefit our economy for years to come.

ATR Says Tax Agreement Would Not Violate Pledge

The Arizona Republic’s Political Insider blog cites Americans for Tax Reform’s Taxpayer Protection Pledge as a stumbling block to closing a budget deal. While it’s true that ATR considers a tax hike referral to the voters the same as a vote to raise taxes, and therefore a violation of the pledge, if the referral is part of a deal that results in a net tax cut it does not violate the pledge.

Of course that’s not ATR’s only stipulation. They strongly recommend writing the ballot language so that the tax cuts are not contingent on the passage of the sales tax hike. Additionally, they’d like safeguards against any extension of the “temporary” tax, or repeal of the permanent tax cuts. These points are key. To read Grover Norquist’s letter to lawmakers, click here.

The proposed budget deal includes $400 million in personal and corporate income tax cuts, as well as the permanent repeal of the state equalization rate (a $250 million a year property tax scheduled to come back this year) and a state spending cap for three years. We support this deal. The reforms and tax cuts outweigh the potential sales tax increase, which will be left for the voters to decide.

We still believe that raising taxes in this economy is not the answer. However, the state needs a budget that both the legislature and governor support. Let’s take the deal, and let the voters tell us what they think of the tax hike.