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Arizona’s Low-Income Families Have the Most “Skin In The Game” When it Comes to Paying State and Local Taxes

January 26, 2012

Phoenix contact: Dana Wolfe Naimark
dnaimark@azchildren.org
(602) 266-0707 #214  work
(602) 882-5755 cell
Tucson contact: Penelope Jacks
psjacks@azchildren.org
(520) 795-4199 work

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Arizonans with modest earnings contribute a much larger share of their income to support schools, roads and other public assets than do better-off households and profitable corporations, according to a new report by Children’s Action Alliance.

The report, called Skin in the Game, shows that even those who earn too little to owe income taxes pay proportionately more in other taxes than upper-income Arizonans.   Creating a “flat” state income tax, as some have suggested, would make the situation even worse.

Skin in the Game looks beyond the political talking points, slogans and false claims to examine who really pays taxes in Arizona. 

“We hear it repeated time and time again in Washington, D.C. and here in Arizona that families with low incomes don’t pay their fair share of taxes and should have more ‘skin in the game,'” said Dana Wolfe Naimark, President and CEO of Children’s Action Alliance.  “The facts show just the opposite.   Arizonans with the very highest incomes actually have the very least skin in the game.”

At the same time, Arizona’s tax code provides numerous ways for profitable corporations and wealthy individuals to pay less in state and local taxes.  Families and corporations can use a variety of tax credits to completely wipe out their state income tax bill. Corporate tax cuts and tax credits that are intended to stimulate new jobs and encourage specific investments and donations are  also shrinking the state’s tax base for economic priorities like education and health care.

Key findings include:

  • Arizona households earning less than $20,000 spend $12.50 out of every $100 of their income on state and local taxes; the wealthiest Arizonans spend less than half that. Those earning $437,000 or more spend only $5.60 out of every $100 of their income on taxes.
  • Nearly three out of four of corporations paid just $50 in income tax, the legal minimum.  Fewer than one in ten corporations paid $5,000 or more.
  • Thirty percent of household tax returns filed for tax year 2009 owed no state income tax.  More than two thirds of these eliminated their tax liability through the standard or itemized deductions.
  • Arizona’s varied income tax rates partially offset the sales, excise, and property taxes that eat up a larger share of what low- and moderate-income families earn.
  • When fully phased in, cuts to corporate income and property taxes,   combined with the many corporate tax credits passed during the last six years, will cost the state $778 million each year.  That would be enough to fund all-day Kindergarten statewide, help families afford child care, provide health insurance to children in working families, build and repair schools, and buy new equipment for K-12 classrooms and campuses.

“Our findings underscore why Arizona should reject proposed tax schemes, like the flat tax, that cut taxes for the wealthy at the expense of everyone else,” Naimark said.  “Arizona needs a budget and tax system that fuels our goals for a vibrant economy with plentiful jobs and strong families.  We can’t afford policies that sell out our future and damage the health and education of the children who face the biggest struggles.”

The complete report is available here

Children’s Action Alliance is an independent voice for Arizona children at the state capitol and in the community.  CAA works to improve children’s health, education, and security through information and action.