Phoenix, AZ – The Arizona Free Enterprise Club today has released its new study on tax reform titled Making Arizona the 10th Income-Tax-Free state: The Economic Case for Tax Reform.

Written by economist and Heritage senior fellow Stephen Moore, the paper evaluates Arizona’s current level of economic competitiveness in the US and how no-income tax states have historically outperformed high tax states in economic growth.

Some of the key findings in the paper include:

  • Eliminating the income tax would give Arizona a competitive advantage for jobs and new investment. Though Arizona has historically experienced solid economic growth and performance, the housing recession in 2008-2009 hit the state’s economy especially hard. A phase out of the income tax would help Arizona’s economy get back on track and, as a high tourist state, is a an excellent candidate for this type of reform.
  • Job growth in no-income tax states has been more than double the rate than high income tax states. Between business relocation and new startups, job growth from 2003-2013 in states without an income tax, consistently beat high tax states. In fact, from 1990 to 2014, Texas and Florida experienced almost triple the job growth than that of California and New York.
  •  People are voting with their feet to keep more of their income. On net, 1,000 people are migrating to low tax states each day, while approximately the same amount is exiting high tax states. That means that about $125 Billion in purchasing power (adjusted gross income) is going from one state to another, with low tax states benefiting the most.
  •  There is no evidence that high tax states provide better or more services than states without an income tax. In many cases, such as California and Illinois, high tax states end up paying more for services, but in fact have far worse outcomes in terms of quality of service or improving lives.
  • Politicians should spend more time creating a climate conducive to economic growth than trying to close wage gaps. Contrary to the belief that consumption based taxes harm low income families and increase income inequality, there is no evidence for this to be the case. In fact, the evidence shows that progressive tax policies end up chasing away workers, businesses and capital, which lead to lower wage growth and fewer opportunities for low and middle-income workers.

“Eliminating the income tax is a matter of economic competitiveness, and we need to be proactive to keep up with other states.” Free Enterprise Club President Scot Mussi said.

Mussi continued, “There is no doubt that comprehensive tax reform that includes moving away from the income tax will lead to faster growth, more jobs, and additional revenues to finance public services. It is a winning formula for Arizonans at every income level.”

The paper can be viewed online by clicking here.  For additional information on the Club’s policy paper on the economic benefits of eliminating the income tax, contact Scot Mussi at info@azfree.org or at 602-508-6088.

 

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