TIME Initiative vs. Governor’s Sales Tax Referral

On the Senate floor yesterday (during the doomed referral, and then combined referral and tax package votes), a conservative lawmaker questioned how those who had been opposed to the TIME ballot initiative last election cycle could now support the tax package that includes a sales tax referral. The TIME initiative was a ballot proposition that would have increased the state sales tax rate from 5.6 percent to 6.6 percent (a 17.8% increase) to fund roads, freeways, light rail, commuter rail, open space conservation, beautification enhancements, and habitat preservation.

As the main opponent of the TIME initiative and a supporter of the tax package, we’re happy to breakdown why we opposed one and not the other.

Before the tax cuts were added to the tax package, we were opposed to the governor’s sales tax increase referral just as we opposed the TIME initiative. The Club continues to believe that a tax hike in the middle of a recession is an economic-killer. We do not want to see Arizona have the 5th highest sales tax in the nation without offsetting business-inducing income tax cuts. While we still oppose the sales tax increase, the benefits of the tax cuts are worth the risk of the sales tax passing. The tax cuts are significant and permanent.

If TIME had made it to the ballot in November 2008 and passed, the budget problems the state is facing would be far worse. TIME would have increased annual spending by more than a $1 billion a year, and this spending would have been voter-protected and therefore outside the purview of the legislature. With sales tax revenue falling drastically, there’s no question TIME’s earmarked funds would have exacerbated Arizona’s structural deficit.