The AZ Republic recently reportedly on the reduction in state revenue caused by the Legislature cutting the budget of the AZ Department of Revenue (DOR). I’ve previously talked and written about this penny wise, pound foolish move, and this article just reinforced my assessment.
In spite of warnings from experts, state budget cuts forced layoffs of AZ DOR auditors responsible for corporate auditing resulting in a $75 million fall in revenue from 2016 to 2017.
In October of 2016, the DCourier reported AZ DOR’s reduction of auditors from 30 to 4. “There basically is no longer any corporate activity at the Department of Revenue,” said Georganna Meyer, the agency’s former chief economist, “That’s going to have a significant impact on any enforcement revenues we’ve seen in the past.” Governor Ducey’s spokesman brushed aside the sharp drop in the number of corporate auditors saying state revenues and tax collections were up. An AZ DOR spokesman backed up the claim, but said the impact of the 50-employee layoff had not yet been felt.
This isn’t nearly enough said Meyer. “Corporate auditing is hard and companies will cheat if they can get away with it.” With more than 50,000 corporations in the state, the oversight job is huge, but just the threat of an audit helps honest companies stay that way.
Even without cheating, corporations are making out like bandits in Arizona. In 2013, they were “paying” a tax rate of close to 7 percent, in 2017 it was 4.9 percent.
Arizona’s entire annual budget is just over $9B, but our Legislature gives away over $13B in corporate tax breaks each year while our K–12 schools lag the national average for funding by almost $4B. The dogmatic determination to pursue repeatedly wrong-proven trickle-down tax breaks is a race to the bottom that will not end well (ask Kansas).
Republicans know tax cuts sell, so they tout State tax reductions to get voters on their side. But it’s a bait-and-switch strategy. Counties, cities, and school districts get stuck asking for local tax increases (sales and property) to protect investments in education and infrastructure. For residents and small businesses, it’s still a tax increase, but poorer, rural areas will be less and less able to shoulder them, and we’ll continue to segregate our communities into the “have’s” and “have nots.” That’s not a winning State strategy.
We’re on a downward spiral that can be fixed with some simple, well-placed policy changes. We need legislators who are serious about building a positive future where both business and our citizens can thrive. We need legislators willing to exercise real fiscal responsibility by saying “NO” to those corporate giveaways that don’t produce a return on investment for our state and its citizens.