Arizona passes policies Congress should mimic

By: Michael Peller
The Biden administration has signaled what they’re looking for in the federal budget proposal for fiscal year 2023. What’s included? Notably, more fiscally irresponsible government spending and ideas to raise or create new taxes. Curiously, the plan hides just how much money taxpayers will be on the hook for with an accounting placeholder. As Washington doubles down on their tax-and-spend policy agenda, the results will be more of the same.

Inflation — or the rate at which consumer prices rise — has hit a four-decade high. Families are feeling the financial gut punch at the grocery store, gas pump, and even the used car lot. For many, the inflationary tax has amounted to a pay cut. In March, for example, as prices rose by 1.2%, worker wages only increased by a fraction of that during the same period. Small businesses, meanwhile, are struggling to balance the skyrocketing cost of input materials and retaining qualified talent without scaring off customers with sticker shock.

As the midterm elections approach, the Biden administration is in a pickle – and it will be difficult to wiggle out of it. Their job approval rating is under water and a recent NBC News poll shows a plurality of registered voters prefer Republicans to take control of Congress.

As Washington fumbles the ball, some states have acted to strengthen the economy and empower Main Street. These areas are easy to spot on a census map as people have approved of the policies by moving there. Arizona is a prime example — a state where term limits and single subject bill rules have helped drive policy forward.

Passed and signed into law in 2021, tax reform legislation is set to benefit Arizona small businesses and working families alike. The reforms incrementally condense and lower tax rates until most will be paying a flat income tax rate of 2.5% by 2025. A middle-class family of four could enjoy savings of up to 40%.

Small businesses and their employees will experience a windfall as well. Currently, owners of pass-through small businesses — typically sole proprietorships or s-corps — pay up to an 8% state income tax. Under the new code, they will be subject to a 2.5% rate. And the extra money won’t be stuffed under a mattress for a rainy day. Entrepreneurs reinvest extra cash back into businesses to raise employee wages, upgrade facilities, and expand operations. The whole community benefits.

And prior to the tax cuts, Gov. Doug Ducey adopted a restrained, fact-based approach to the coronavirus pandemic — unlike the neighboring states of California and New Mexico, which became drunk on executive power.

Because Arizona businesses were given the green light to reopen sooner, the state economy was able to bounce back quicker and offer more opportunity. According to federal government data, there are more people working in Arizona now than before the pandemic – that’s not the case in California or New Mexico. In fact, both of those states also experienced an exodus of residents in 2021.

It’s clear the current tax-and-spend agenda coming out of Washington isn’t working. Federal lawmakers should avoid doubling down and instead look to Arizona for inspiration. Slowing down the money printing press and voting to make the 2017 Tax Cuts and Jobs Act permanent before it expires would be two big steps forward.

Michael Peller is the owner of Pelstar Computer Systems, a small business based in Tucson.