Real tax reform will start when transparency increases, shell game stops

During my time as a member of the Arizona House of Representatives, where I have served as a member of the Appropriations Committee for seven years, the amount of revenue the state has to fund its obligations has been heavily debated.

While I respect the difference of opinion regarding the appropriate level of funding, I believe most people will agree Arizona’s tax system is complicated, lacks transparency and accountability, and is in need of serious reform.

Revenue for the state’s general fund consists of three primary sources: income, sales taxes and property taxes. In addition to state taxes, taxpayers are subjected to county taxes, city or town taxes, and sales taxes for a variety of things, such as transportation, jails and health-care facilities.

There are also a myriad of statutorily created special taxing districts, which have the ability to levy property taxes to fund a unique purpose, such as a county flood-control district. Often, these districts are governed by county supervisors serving in multiple capacities in which their ability to tax can be masked in those duplicities.

For example, the elected officials serving as supervisors of a county also serve as the board of the county floodcontrol district. In their role governing the flood-control district, they could vote to approve a property-tax increase on the residents of the county and then campaign for re-election as a supervisor and say they have not voted to raise residents’ taxes.

While the multiple levels of taxation add to the complexity of Arizona’s tax system, the transparency of the system is often compromised by tax credits and other incentives that regularly favor new businesses over existing ones.

During my tenure as the chair of the Ways and Means Committee and during most budget negotiations, I have been bombarded with requests to “tweak” the tax system in order to stimulate economic development. Too often, stimulus for one taxpayer is at the expense of another. What is good for the new should be good for all.

In addition to taxation by multiple layers of government, sales and property taxes are used to generate revenue for specific purposes as well as general services. Currently, there are ongoing discussions regarding Proposition 301, a half-cent sales tax that funds K-12 education. This tax, which expires in 2022, can be extended, but if left to expire, it would result in a tax decrease.

On top of these efforts, there are business groups considering a reduction in their property-tax burden — which, if successful, will result in a shift of property taxes to the other classes.

While these endeavors may have merit on an individual basis for specific reasons, I believe in a more holistic approach, because it contemplates the benefits and impacts to all taxpayers.

Taken on an individual basis, tax cuts, tax credits, economic incentives and new property or sales taxes to address specific issues may seem appealing, but when viewed together, they are just robbing Peter to pay Paul. Until we establish a nexus between the role of government, the services it provides and the most equitable way to pay for it, we will continue to have a flawed system.

These issues are not limited to Arizona. There is finally an effort being undertaken at the federal level to tackle an outof-control tax system and bringing much-deserved relief to all taxpayers.

As elected officials, we need to lead by example and demonstrate we can make the tough but necessary decisions. Only then will we have an environment where individuals and businesses alike can maximize their opportunity to flourish and succeed.

Michelle Ugenti-Rita represents Fountain Hills and Carefree in Legislative District 23 of the Arizona House of Representatives. Email her at mugenti @azleg.gov.