Originally Published: June 19, 2012 9:59 p.m.
Here's a little more on state taxes, and something I wrote about flat taxes that I never thought I would.
As covered in the first two columns on this topic, total state and local taxes hit low and middle earners about twice as hard as they do the top. That's mostly because sales taxes are regressive. The explanation and original data is with those columns online, for April 18 and May 16. Adding yet another piece of confirming data this time, the Arizona Leadership Institute noted that part of the data for a state study confirming regressive taxes was done by KPMG, one of the international "big four" accounting firms. The link is online.
You might think sales tax is a flat tax but, as explained in that first column, it isn't. Since it's regressive, why have it? Visitors, that's why. We are a state with a lot of tourism and part-time residents. We need to make some revenue off of them, or at least recover some expense. Tourism is big business and a plus to the state, but for government it's an expense. They add to the wear and tear on roads and add many other expenses, plus we spend government money supporting tourism. It's the taxes, primarily sales tax, that makes it a plus.
For local governments it's similar. There are various ways to collect local taxes but if not for sales tax there wouldn't be much collected from visitors, both those from out of state, and from elsewhere in the state.
Several critical comments on the previous columns assume I'm advocating big tax increases or it's just a rationale for more government spending. There are things I think we should do more of, like spending on education, but those are separate subjects. State taxes are their own topic. It's not about more or less in total taxes. Even if we cut government services further, and cut taxes to match, we would still need to collect taxes. Changes that would make our taxes fair would not need to collect any more in total tax. It could be revenue neutral. In fact it should be. Total taxes collected and how they're spent ought to be a separate discussion. The question remains, how is that burden spread across people? Evenly? Or as it is now, harder on the middle class? Even harder on lower earners?
That brings me to flat taxes. I've always been against so called "flat" taxes because when you look at them carefully they never are. They always end up giving the middle income a bad deal. I'll continue to be against them in most contexts, but when it comes to state taxes, I'd be happy to get up to flat.
Some critical comments assume I want to soak the rich. Which is kind of funny, when you talk about how the middle and low end pay more of their income than the top and you'd like that to end, for that to get interpreted as soaking the rich. It's not about soaking the top, it's about how everyone else has been getting soaked for a long time. It's about ending that.
Some of the people who advocate flat taxes, usually referring to flattening income tax down to one bracket, seem to have no problem with the consequences. If lowering the top tax rate means less revenue, just cut spending. Or if we can't cut that much, just raise more tax on the low and middle. Mostly the middle since low earners don't have much. But point out that taxes are upside down and it would take reducing taxes on the low-to-middle or raising them on the top, or a balance of each, and suddenly you're wanting to soak the rich. No. Just bring everyone level.
It's not the fault of most rich people that the state set up a mixed up tax system. They just pay their taxes, but what they've been asked to give has not been commensurate with what others have been paying, and it's been that way for a long time. It needs to be set right.
Many people want flat taxes. Well, okay. I'm on board. I assume if you want them flat you want that no matter which way the flattening has to go.
Though if you want flat taxes you'd better start hammering that home to your representatives now, because currently they're not flat. They're upside down and the legislature is likely to make it even worse next session.
It's a simple tax principle: No one should pay a greater share of income than those above them.
Tom Cantlon is a longtime local resident, business owner and writer. Contact him at TomCantlon@TomCantlon.com.