By Stephen Slivinski
When Governor Jan Brewer released her “Four Cornerstones of Reform” proposal on Jan. 21, she included some good suggestions to change tax policy that would help to spark economic growth in Arizona. Yet it doesn’t go as far as it should.
For example, the governor wants to bring down the corporate income tax to “around 5 percent” from its current rate of 6.968 percent. This reform is certainly needed. The current corporate income tax rate is too high compared to neighboring states Colorado and Utah. That makes Arizona less attractive for businesses looking to move somewhere. To be competitive, Arizona’s corporate income tax should be at least as low as Colorado’s 4.63 percent rate.
In fact, Governor Brewer could wipe out another problem with the Arizona tax code – the unequal tax rates on different types of income – if she proposed a uniform top tax rate for both personal and corporate income. In that case, the top rate should be 4.5 percent to avoid raising personal income taxes.
Better yet, why not consider getting rid of one or both income taxes altogether? Such a bold move could make Arizona extraordinarily competitive for more business investment and job growth.
When the Legislature considers these proposals, Governor Brewer’s tax plan should be seen as the opening bid in the debate and the minimum required for success. To really hit a home run, legislators should consider a fundamental change to the tax system in Arizona and not simply tinker around the edges.
Learn More:
Goldwater Institute: Corporate Tax Reform: How to Woo Business Without Spending a Dime
Goldwater Institute: Cut taxes, don’t raise them
Office of the Governor: Four Cornerstones of Reform
Stephen Slivinski is a senior economist at the Goldwater Institute. He is an expert in tax and budget policy at the state and federal level. He formerly held the position of research fellow at the Mercatus Center at George Mason University and senior editor in the research department of the Federal Reserve Bank of Richmond. Prior to that he was director of budget studies at the Cato Institute, a senior economist at the Tax Foundation, and director of tax and budget studies for the Goldwater Institute. He holds a master's degree in economics from George Mason University. 
