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Governor defends plans for road-tax measure
By HOWARD FISCHER
Capitol Media Services
Thursday, May 08, 2008
PHOENIX -- Gov. Janet Napolitano is defending plans to hike the state sales tax to among the highest in the nation to fund transit improvements rather than put the burden on those who will most directly benefit.
Napolitano, who is backing the ballot measure to hike the state sales tax by a penny, said Wednesday that levy is the only thing that generates enough money and is reliable enough to support a $42.6 billion plan to build new roads, widen existing ones and finance new and expanded mass transit programs.
The governor acknowledged that sales taxes are paid by everyone in proportion to the number and price of the taxable items they buy. And the additional levy, if approved by voters in November, would add one percent to the final price tag of these items.
But Napolitano said raising Arizona's tax to 6.6 percent for 30 years -- which is what the initiative would do beginning in 2010 -- does not worry her. She said the state's overall tax burden, including income and property taxes, would remain "relatively low compared to other states."
Opposition already is surfacing.
Byron Schlomach, economist for the Goldwater Institute, called sales taxes "a very poor substitute for user charges."
The Federation of Tax Administrators already puts Arizona's current 5.6 percent sales tax rate in the middle of all states that levy a state sales tax. If voters approve the penny hike in November, only five other states will have higher sales taxes.
He said the best kind of levy -- assuming more money for transit is really necessary -- would involve user fees.
A prime example of that in this kind of case is the gasoline tax: The more people use the roads, the more they pay.
Marty Shultz, treasurer of the organization pushing the project, said his group did explore hiking the state's 18-cent-a-gallon-gasoline tax which has not been raised since 1991. But he said the idea was quickly dismissed as impractical.
Some of the problem is just pure numbers: an additional penny on the tax raises just about $38 million a year, far short of what is raised by a penny on sales taxes. Potentially more significant, Shultz said, are the longterm trends.
"The gas tax is becoming less efficient all the time," he said, what with cars and trucks becoming more fuel efficient and more people seeking leaving their vehicles at home and using mass transit.
Napolitano agreed. "It doesn't yield enough," she said of gas taxes.
The governor said it remains to be seen whether a general tax is acceptable.
"That will be a judgment for voters to make," Napolitano said. She added, though, she personally supports the transit plan -- and the funding source.
"I'm a taxpayer," Napolitano said. "I'm willing to pay this in order to get that infrastructure in place."
Shultz also dismissed claims that sales taxes are "regressive," imposing a relatively higher burden on people near the bottom end of the income scale than those at the top, pointing out that food purchased at grocery stories for home consumption is exempt, as are prescription medications.
The governor also said she does not believe higher sales taxes might hurt business activity here.
"I think, on balance, our overall commercial activity will be hampered if we don't have a transportation infrastructure that allows people and goods and services to move easily around the state," Napolitano said.
Shultz said there is one other reason coalition members opted for higher sales taxes: The state constitution says gasoline taxes can be used only for roads -- and not for things like mass transit.
Much of the debate over the levy is likely to surround earmarking $7.6 billion of the total raised for mass transit, notably financing intercity rail service between Phoenix and Tucson as well as expanded light rail in Maricopa County and setting up a similar system in Pima County.
Schlomach said these kind of rail projects make the least financial sense, with high capital costs for construction on the front end and little flexibility to alter routes later on if growth and ridership patterns change. He said if the state wants a subsidized system of mass transit -- and most systems do not pay for themselves -- adding more express buses, perhaps with their own dedicated lanes is a better option.
Napolitano, however, called rail plans "farsighted," saying that other communities which have built rail systems have found people use them.
"When you're in a world where gasoline is $3.50, $3.54 a gallon, heading up to $3.60 and going north, people are asking about what are our alternatives to driving," she said. "And in Arizona we don't have much to offer them right now."
The governor also said that $7.6 billion for mass transit also includes funds for smaller communities to get help for things like van pools for seniors.
Current state sales tax rates:
7.25% -- California
7.0% -- Mississippi, New Jersey, Rhode Island, Tennessee
*6.6% -- proposed Arizona sales tax
6.5% -- Minnesota, Nevada, Washington
6.25% -- Illinois, Texas
6.0% -- Arkansas, Connecticut, Florida, Indiana, Idaho, Kentucky, Maryland, Michigan, Pennsylvania, South Carolina, Vermont, West Virginia
*5.6% -- current Arizona rate
5.5% -- Nebraska, Ohio
5.3% -- Kansas
5.0% -- Iowa, Maine, Massachusetts, New Mexico, North Dakota, Virginia, Wisconsin
4.65% -- Utah
4.5% -- Oklahoma
4.25% -- North Carolina
4.225% -- Missouri
4.0% -- Alabama, Georgia, Hawaii, Louisiana, New York, South Dakota, Wyoming
2.9% -- Colorado
None -- Alaska, Delaware, Montana, New Hampshire, Oregon
-- Source: Federation of Tax Administrators
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Steve wrote on May 8, 2008 2:21 PM: " "Road Tax?!" Just a week ago she told us it wasn't a tax, but rather a "Revenue Enhancement..." So much for the "no tax increase" promise. "
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