Help solve the fiscal crisis – go buy something and pay a sales tax

by Mark B. Evans on Nov.29, 2009, under Editorials, Politics

Help solve the fiscal crisis – go buy something and pay a sales tax

‘Tis the season to go shopping. Please do. Your state and local governments are counting on it.

The major source of funding for the state and its municipalities is sales taxes. It accounts for nearly half of the state’s general fund income and more than two-thirds of Tucson’s.

It’s also the key reason why the state and most municipalities are suffering through fiscal crises and considering cutting key government services to balance their books.

As the recession deepened and people lost their jobs or became fearful they might lose their jobs in the past year, they curtailed their spending. Moreover, the recession nearly killed state tourism and convention business, creating a sales tax-decline double whammy.

If the state is to recover from this crisis it must reform how government is funded and create a more diverse tax system.

But that’s a long-term solution. In the short term, the only way to save key services and programs, such as teaching children how to read and write, is for those of us with jobs (which is 90 percent of us) to purchase taxable goods and services.

And related to that, we should not make cash charitable contributions this year or make private or public school tax credit donations.

The state can’t cut its way out of this problem. It will take in roughly $6.3 billion this year in the general fund. The universities, community colleges and K-12 schools account for nearly $5.3 billion of that leaving about $1 billion to fund the rest of state government. That’s about $3 billion short of what’s needed.

So unless Arizona plans on closing its universities and having 100 students per classroom in elementary and high schools, it’s going to need more tax revenue.

A tax increase passed by the Legislature or voters won’t happen soon enough to do any good.

So it’s up to us to go shopping. And don’t shop online and buy stuff from other states. That doesn’t help; Arizona doesn’t tax online sales.

As for charitable donations, it might seem harsh to suggest not making them, but most of the state’s nonprofits rely on government grants and contracts. State and local governments are drastically cutting this funding putting these agencies at risk.

If your intent in making the charitable donation is to serve the greater good, you’ll do a better job of that this year by making a taxable purchase for the same amount of your intended donation and donating the item to Goodwill or a similar agency than by making a cash donation.

In 2007, Arizonans donated roughly $2.2 billion, according to the Lodestar Center for Philanthropy and Nonprofit Innovation at Arizona State University. If that amount of giving were turned into taxable purchases, it would inject about $100 million into the state’s general fund. And if those purchases were made in municipalities, it would provide them roughly $20 to $30 million in sales tax revenue. (We know it doesn’t work this way, it’s an exaggeration to prove a point).

And school tax donations this year will only hurt education in the state, not help it. The program is a credit, not an income deduction, so it comes directly out of the general fund rather that just reducing a taxpayer’s taxable income by a few hundred dollars.

The school tax credit program siphoned about $100 million out of the state’s general fund last year. About $63 million went to private schools and the rest to public schools.

But the public school donations can only be used for extracurricular activities. New band uniforms and field trips to New York City are swell, but what’s more important, field trips or math teachers?

By putting this money back into the general fund, it will help the state avoid eviscerating our public schools.

If you want to help your child’s school, go buy something and pay a sales tax instead.

Our state leaders seem incapable of solving this fiscal crisis so we’ll have to take matters into our own hands. Go shop. Pay a tax.

It’s the only way out.

3 Comments for this entry

ricardosmall
November 30th, 2009 on 6:43 am
The Arizona Legislature, the county supervisors and the mayor & council aggravated the fiscal problems of today by failing to set taxes at levels required to sustain voter mandated programs, as well as other parts of the annual budgets.

If what I remember is still true, sales tax revenue is collected at point of origin, but is distributed to assessed value of real estate. In other words, part of the sales taxes collected in Pima County go to Maricopa County, where the Buckeye nuclear plant’s assessed value siphons off some of Pima’s sales tax revenue.

My solution to the 8.1% combined sales tax rate in Tucson, Arizona is to move to Oregon, where there is no sales tax. Oregon real estate taxes are ~20% higher than in Tucson, but that equates to ~$1,000 more per year for a house that my wife and I recently purchased up there. I also plan to buy a car soon and will save way more than a grand on just that purchase, figuring I’ll spend ~$25,000 x 8.1% = $2,025 sales tax. I also plan to buy a new $1,200 computer within the next couple of months, saving more than $100 in sales tax on that on additional purchase.

I’m voting with my feet on sales taxes in Tucson, Arizona.

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tiponeill
November 30th, 2009 on 12:00 pm
I’m not at all sure I want to enable those clowns in Phoenix to continue their reign of terror. I’ve been doing more shopping online – no sales tax.

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fundraiser
November 30th, 2009 on 3:33 pm
Mr. Evans,

I was extremely disappointed to see this article in today’s paper. First of all, the statement that “most of the state’s nonprofits rely on government grants and contracts. ” is simply not true. SOME rely IN PART on government grants and contracts; some organizations more than others. Some non-profits do not receive any funding from federal or state government and only small amounts from city/county government.  Regardless, all of us rely heavily on private donations from the community to support our missions. The statement that state and local governments are drastically cutting the funding IS true and, therefore, those who have depended on this funding must lean even more heavily on the community this year. Proceeds of fundraising events in 2009 have been down considerably as well.

The idea of making up the state deficit on the backs of the underserved is short sighted. As I am sure you are aware, the non-profits are also seeing an increase in need with this recession. Without the generosity of the community, we would not be able to provide for those in need. In addition, the non-profit community contributes to economic development by providing an abundance of jobs as well as purchasing goods and services to support our missions.

I think you oversimplified things by stating “New band uniforms and field trips to New York City are swell, but what’s more important, field trips or math teachers?”   I think that, were you to do your homework, you would find that the school tax money is spent to provide much more and often to supplement academics, providing for a more well-rounded education when the state supports only the basics.   The option to designate our state tax dollars to specific schools or causes is one last way that we, as citizens, are able to feel that our hard-earned dollars are being appropriated as we see fit rather than relying on the politicians to make sound decisions, especially those of us in Pima and other southern Arizona counties.

I say, take full advantage of the state tax credit options and all other tax deductible options this year! THEN go shopping!

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