Click here for a copy of the amicus brief.
An Arizona flat tax proposal by renowned economist, Dr. Arthur Laffer, commissioned by the Goldwater Institute and the Free Enterprise Club.
Forget for a moment whether the deal to keep the Cubs in Mesa is constitutional. Given the sharp eye of Goldwater Institute’s Clint Bolick and the recent CityNorth court decision he forced, it’s perplexing that deals like this continue to surface. That aside, Wednesday’s Commerce Committee hearing was an illustrative yet unconvincing display in favor of raising taxes on rental car companies and slapping a surcharge on Cactus League tickets to finance a new Mesa stadium for the Cubs.
Whether the Cubs need a new stadium is not the focus of this Fiscal Note. Whether one industry should be compelled to subsidize it against their wishes is. Rental cars are beginning to rival tobacco when it comes to public finance. Because so few people smoke, politicians don’t fear raising tobacco taxes. It is largely viewed as someone else’s tax to pay and an easy revenue source, since either spending cuts or a tax increase on the general public takes a bit more courage. But it’s usually bad public policy.
Rental cars seem to be the new piñata.
Proponents of the rental car tax believe that tourists will mostly foot the bill, so socking it to them—like smokers—won’t irritate most voters. The facts are stubborn, however. National studies show that upwards of 50 percent of rentals are from in-state residents. A rental car executive testified at the hearing that it’s closer to 60 percent of Arizona residents who rent cars, eroding the argument
that out-of-towners will carry the burden of the tax.
This bill mandates a tax on just one industry, but proponents argue that they’ll stand to benefit since tourists will come to watch the Cubs and have to rent cars. That argument isn’t working as the industry uniformly opposes the bill.
Lawmakers know best
Asked why rental car agencies should subsidize any part of a new stadium, one lawmaker said that it’s such a small amount “no one will notice.” (Pssst, the rental car companies noticed.)
Asked if the proposed surcharge on ticket prices was too steep, another lawmaker said that the amount is “not much of a burden.”
According to whom?
Rental car companies set up shop to rent cars and make a profit. They should not be compelled by the state to subsidize every activity they might benefit from. What’s next, taxing them to keep state parks and rest areas open?
Taxes should be neutral, broad based, transparent, and as low as possible. The Cubs tax violates all of these principles.