Since the 1990s, politicians have shrunk Arizona’s tax base by growing tax credits and carve-outs. These now cost Arizona $24.5 billion per year and growing — far more than ever enters our general fund. This is the root reason why Arizona K-12 schools rank 47th in the nation for per-pupil spending: we simply don’t have the funds because we are giving them away.
Our teetering tax structure relies heavily on volatile sales taxes and extremely low income taxes. Arizona is one of just 11 states with a corporate income tax rate below 5%. Republican lawmakers have also slashed personal income taxes to 2.5%, heavily benefiting high-income earners. This leaves experts concerned that Arizona won’t have enough revenue to sustain critical services (like public schools) once pandemic relief money runs out and the inevitable next recession arrives.
As if that weren’t bad enough, experts are projecting our state is already tipping into the red. A recent report from the nonpartisan Joint Legislative Budget Committee (JLBC) projects Arizona will be underwater by FY 2025. The lowlights include $2 billion in tax cuts for the wealthy; an unbudgeted $200 million for the universal ESA expansion, projected to grow to nearly $400 million in 2024; an upcoming fiscal cliff of $300 million for soon-to-expire Prop 301; and naturally slowing economic growth.
Further tax cuts will only compound the crisis, but Republicans have proposed to slash state revenues even further. The fiscal impact of these bills so far is a staggering $872 million to the state. Because half of the general fund goes to public schools, that would mean a $450 million cut to public education. More than half of proposed bills still lack any fiscal analysis, so that number will only balloon in days and weeks to come.
In order to provide all Arizona’s children with the fully funded public schools they deserve, lawmakers must first stop poking holes in our state’s bottom line. It’s time for a full overhaul of our tax laws and a restructure that prioritizes stable revenue streams that fund Arizona’s future, not tax carve-outs for special interests.