KJZZ’s Friday NewsCap revisits some of the biggest stories of the week from Arizona and beyond.
To talk about a proposal to do away with the state income tax, a potential vote to override a gubernatorial veto and more, The Show sat down with Daniel Scarpinato with Winged Victory Agency and former state lawmaker Aaron Lieberman.
Full conversation
MARK BRODIE: So let’s start, Daniel with Andy Biggs. He held a rally last weekend where he talked about, among other things, doing away with the state income tax.
This is something that your former boss, Gov. Doug Ducey, he talked about lowering it but not necessarily getting away with doing away with it altogether. But I’m curious what you make of this idea of just saying, okay, no more income tax.
DANIEL SCARPINATO: Well, I think it’s a noble goal and one I philosophically agree with. And as you noted, what Gov. Ducey had talked about was getting the income tax as close to zero as possible. We took it, we actually lowered every bracket down to a 2.5% flat tax, lowest flat tax in the country.
Despite that, actually the spending in our state budget has grown by 40% since he’s left office. So we’re able to do that and have resources to invest in things.
I think the challenge here is there’s basically three legs to the stool in Arizona when it comes to funding our budget: income tax, property tax and sales tax. And so can we eliminate it? I think that might be tough. Can and should we continue to chip away at it? Yes.
Because you have other states — Jared Polis, the Democratic governor of Colorado, recently said he wanted to lower their income tax. Nevada has no income tax. Texas has no income tax. They have other sources of revenue, like gaming and other issues, oil and gas in Texas.
So I think that this would be tough to do, but I think the goal of chipping away at it as you have resources to do it is going to grow the economy and overall be good for the state because we’re in a dynamic atmosphere where other states are constantly looking at how to lower and improve their tax code.
BRODIE: Aaron, let me ask you about one of the things Daniel just said in terms of having the resources to do it, because as you know, having served in the Legislature, it is extremely difficult to raise taxes. Finding other sources of revenue is nearly impossible in Arizona.
So in terms of either doing away with the income tax or reducing it, obviously there’s a competitiveness issue. Daniel mentioned Nevada doesn’t have one, Texas, Florida doesn’t have one. So there’s that kind of arguing. But there’s also the need to fund state services.
AARON LIEBERMAN: Look, the only problem with those zero-tax states is you have to go live there. If you want to claim that tax rate. Like we’re playing a winning hand. People are moving here. People love Arizona at our current tax rate.
I think this would be a disaster. We’re basically a broke state. Look at the budget right now. We’re really struggling to meet our basic needs. We don’t have things that other states have. We don’t have the class size cap that Florida has that makes their public schools the envy of the nation. We don’t have any real investments in affordable housing, the things that people care about.
The reason we don’t have those is because we have so little revenue coming into the state. This would be an absolute disaster.
To Daniel’s point, you got to get it from somewhere, and all that’s going to happen is you’ll have to increase property or sales tax. That usually ends up with property taxes going up, because that’s the easiest way to kind of backdoor it in there.
I’ll tell you, when I moved back home to Arizona after being gone for a while, our first property tax payment, my wife said, “Oh, we got to pay this.” I thought it was a quarterly payment and was shocked. The whole year. I’ve lived in places where you’re paying $25,000 just to have your kind of modest house.
I think an income tax is actually a much better way to get that. And it doesn’t put elderly people on a fixed income and everything else having to wonder if they can keep their house. So this would be a disaster. But I want to reinforce, I’m all for Andy Biggs winning his Republican primary. I think this would be a great issue to have in a general election for Gov. Katie Hobbs to win on.
SCARPINATO: Well, so a couple of things. One is that I agree. I think having the low property tax is part of why we’ve been so attractive for retirees. One of the challenges of doing this, of eliminating the income tax, is we’ve now done a number of things that are voter protected, like you can’t tax services. There’s a lot of things that are kind of off the table. So it’s hard to generate other pieces of revenue.
I would say, though — to push back on what Mr. Lieberman said — is there’s no downside to advocating for lower taxes. And I think Democrats sometimes get caught in this thing of thinking, “Oh, if he’s out there talking about lowering taxes, it’s going to be a great issue for Katie Hobbs.” I think it’s a great issue for Republicans.
So I think again, the goal in kind of the setting the vision of lowering the tax rate, keeping taxes low, finding ways to continually reform it is something that Arizonans support.
BRODIE: We have to talk about the political aspect of this, right? He said it at a political rally sponsored by Turning Point USA. He, of course, is in a competitive gubernatorial primary here coming up next year.
How does this maybe does this in any way affect the outcome? You would expect someone like Karrin Taylor Robson to also be in favor of, if not getting a doing away with the income tax, of at least lowering taxes broadly.
So is this sort of an opening salvo? How do you see this playing in the primary?
SCARPINATO: Well, it’s interesting because going back to 2014 and Gov. Ducey, as we talked about, had a kind of a very measured way, in my opinion, of talking about lowering the income tax. Heads exploded when he said that. And actually in that primary, Scott Smith and some other candidates were like, “You can’t do that. You can’t lower the income tax, you’re going to blow up the budget.”
It was a big issue. And I think it helped him win the primary and general. What has changed is the tax policy is no longer a motivating issue for Republican primary voters. I actually think if you went to a Republican meeting and said, “Let’s raise taxes to build the wall,” you’d have people out of their chairs applauding.
BRODIE: Raising taxes to build the wall.
SCARPINATO: I’m not advocating for that, but —
LIEBERMAN: That’s because so few of those Republican base members pay a lot in taxes. I mean, that’s the reality of the situation.
SCARPINATO: Well, it’s because our coalition has changed.
LIEBERMAN: Exactly.
SCARPINATO: It’s more working class. And so whereas 10, 15 years ago, the Steve Forbes flat tax, lowering taxes — all things I believe in as a free-market conservative — those aren’t, I think, in a Republican primary, issues that are going to light up a room anymore.
BRODIE: Aaron, let me take you back to your days in the state House. Sorry if that is not a pleasant place for you to be. Some of your former colleagues — in the Senate anyway — are going to be put up on the board if they want to override a gubernatorial veto. This is not something that happens frequently.
The governor this week vetoed a bill that basically would have barred, people associated with the Chinese government from owning property in Arizona. She said it wouldn’t really do that much. And Senate President Warren Peterson (R-Gilbert) says, “We’re going to put this up on the board. We’re going to let people vote to override it.” Of course, it needs a two-thirds vote.
Not a lot of Democrats voted for this bill when it went through the first time. Do you see a lot of Democrats voting to override a governor of their party?
LIEBERMAN: This is going to be a tough one. I don’t think it had any Democratic support initially, which honestly is a little bit of a surprise. I think there was an amendment on it. It doesn’t look great on its face is really the only thing I can say. It’s like it’s not like it’s any Chinese landholder. It’s literally banning the government of China from owning land in Arizona.
I think there’s been a lot of good stuff the governor has done around the Saudi Arabian owners of the farms and kind of pushing back on some of this stuff. This feels like there maybe some inside baseball reason to veto it. It’ll be very interesting to see if anyone comes back.
The toughest thing when you’re down there is going up on the board with that vote that you know could be 20,000 pieces of mail in your district, especially when it’s not going to matter. It’d be incredibly unlikely that they get to enough to override the veto.
So you’re basically asking people to go vote for something that’s not going to happen. That’s a tough spot to put people in.
BRODIE: So does this then become a potential campaign issue? If Democrats vote against this, or are we going to be seeing mailers about this?
LIEBERMAN: You know, it’s an interesting question. I’m of the opinion that one of the things that really hurt our swing district candidates last time was some of the immigration votes, where they didn’t side with Republicans on some of those things.
You’ve seen a big shift federally. I mean, (U.S. Sen.) Ruben Gallego is leading the train on secure borders and all of these things. Most of the Democrats in Congress — including our then-Sen. Sinema, who wasn’t a Democrat at the time — but were much more for secure borders.
We haven’t seen that in the core Democrats in the state House. And a lot of people like my friend (former state Sen.) Christine Marsh and others, really it was a big issue.
Did anyone think the biggest issue facing Arizona is in the ownership of Chinese? Like, it seems a little more obscure than that. But it’s on its face, it doesn’t smell very good.
BRODIE: Daniel, do you see a lot of Democrats going against the governor of their party in an override vote?
SCARPINATO: No. The last time we had an override was, I think, 1982. It was over redistricting. It actually happens frequently in other states. Some have a simple majority. But for whatever reason, it has been — and I will say there were several times when I was chief of staff, where I had to physically go down and prevent veto overrides and throw my body on there in front of the train.
But on this one it is a bit inconceivable to me. This really does go in the “tamale bill” category of boneheaded vetoes.
LIEBERMAN: Didn’t she sign the “tamale bill” ultimately?
BRODIE: The next year she did.
SCARPINATO: Yeah, but it was a political disaster. And this maybe isn’t at that level in the public consciousness yet, but it has gotten a lot of attention. There are some real threats to whether it’s Palo Verde or our military installations, our water supplies.
So I don’t really understand. I didn’t really understand their rationale. I think the original bill was a better bill, and it kind of got complicated and watered down. Yet I just think they’ve got to think through what fights to pick, and this doesn’t seem like a distraction that was needed.
