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Robb: Tax increase gambit might work for conservatives

From the political notebook:

• The public opinion survey being peddled by the Arizona Republican Party purporting to show support for Gov. Brewer’s tax increase is, to use a technical term from my erstwhile days as a political consultant, useless. (Actually, the technical political consulting term is more descriptive, but I eschew such language since becoming a genteel journalist.)

First, the survey didn’t ask whether people favored, or supported, or would vote for a tax increase – the conventional ways of soliciting a response.

Instead, respondents were asked how “acceptable” they found a sales tax increase. According to the survey, two-thirds of voters found it very or somewhat “acceptable.” That doesn’t tell you much about whether they would actually vote for one.

Then the poll provided what will undoubtedly prove to be a false premise about how the proceeds from the $1 billion tax increase Brewer is proposing would be used.

The survey said this: “All of the funds raised from these taxes would be dedicated toward maintaining 2010 spending levels for K-12 education, universities, community colleges and health care for the poor.”

All of those programs, however, are substantially protected by the maintenance of effort requirements attached to the federal stimulus money. To get the federal stimulus money, states have to agree to maintain state funding for education and not reduce Medicaid eligibility.

At the end of the day, the combination of state general fund appropriations and federal stimulus funds for next year will probably equal or exceed the current level of general fund support for these programs.

So, Brewer’s $1 billion tax increase would actually be for other state programs. Some of it might go to replace cuts in social service benefits. But most of it perforce would have to go to keeping the state work force in place, doing the day-to-day stuff that the rest of state government does.

If the thing gets to the ballot, I suspect there will be some education givebacks, just to try to improve its salability. But given the federal maintenance of effort requirement, the debate about whether to temporarily increase taxes is mostly about other state programs.

• The temporariness of the tax increase is something else that isn’t being honestly discussed. The survey question says that the tax would last only three years.

Under Brewer’s plan of cutting spending by a billion dollars, using a billion of federal stimulus money, and raising taxes by a billion, the state would still have a structural deficit of $2 billion – the gap between ongoing expenses and revenues.

If state spending increases were then held to 5 percent a year and revenues began growing at their historical rate of about 8 percent, after three years there would still be more than a $1.5 billion deficit. The deficit would still be $1 billion after even five years.

Either state spending has to be cut more than Brewer is saying she is willing to support, or the tax increase isn’t going to be very temporary.

• My guess is that the Legislature eschews a tax increase and makes up the gap from what remains after budget cuts and federal funds through some combination of payment deferrals, securitizing lottery or tobacco settlement monies, or borrowing against existing state buildings.

If so, I don’t think Brewer will threaten to shut down state government because the Legislature wouldn’t refer a tax increase.

There is, however, a cunning game fiscal conservatives could run if they had the moxie.

Brewer has proposed that the Legislature basically enact two budgets: one for what the state would spend if voters don’t approve a tax increase, and the second enumerating the spending that would be restored if voters approved the increase.

The default budget would have to include deeper budget cuts than would be achievable if legislators thought it was for real. It would basically have to balance spending with existing revenues and federal funds.

Given that education has largely been taken off the table because of the federal stimulus requirements, there’s a chance voters would turn down the tax increase. Other surveys show far less initial public support.

If voters turned down the tax increase, the default budget, with the deeper cuts, would go into effect.

So, if conservatives are willing to run the tax increase gambit, they might get through the back door the spending cuts they can’t get through the front door.

Robert Robb, an Arizona Republic columnist, writes about public policy and politics in Arizona. E-mail: robert.robb@arizonarepublic.com

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