Children’s Action Alliance Statement by Dana Wolfe Naimark, President and CEO: Who Really Pays Arizona Taxes?
By now, it’s clear that Governor Romney’s statements about the 47% of American households who don’t pay federal income taxes missed some key points – about Americans and about tax policy. We often hear similar false assumptions about who pays their fair share of state taxes here in Arizona.
The facts show that the Arizona legislature has created numerous methods that profitable corporations and taxpayers of all incomes use to shrink their income taxes. People who don’t owe state income taxes include unemployed Arizonans, working families earning low incomes, seniors receiving social security benefits, and families claiming tax credits. Arizona households who do not pay state income taxes are still paying to support schools, roads, and other public assets. They pay state sales taxes when they go to the store. They pay property taxes through their rent or mortgage. If they own a car they pay taxes when they renew their registration and fill the tank with gas.
When all state and local taxes are combined, low-income households have the most “skin in the game” – the lowest income households pay more than two times the richest 1% as a share of their income.
Arizona needs a budget and tax system that fuels our goals for a vibrant economy and strong families. Taxpayers deserve an honest analysis of who pays taxes and the reforms that will make our communities healthier and more secure. Consider:
- For tax year 2009, three out of four corporations that filed income taxes in Arizona paid the minimum tax of $50. (Arizona Department of Revenue, Tax Year 2009 Corporate Statistics, 12/11.)
- In 2010, corporations reduced their Arizona income tax liability by $72.7 million through the use of tax credits. Another $265 million in tax savings was carried forward to apply in future years. (Arizona Department of Revenue, Arizona Income Tax Credits, June 2012.)
- There are 31 tax credits available to individuals and families on Arizona state income taxes. In 2009, 115,000 taxpayers in Arizona wiped out their personal state income tax bill through tax credits. A family with adjusted gross income of more than $130,000 can end up paying nothing in state income taxes through the use of five common tax credits. (Arizona Department of Revenue, Arizona Income Tax Credits, June 2012; email information from Office of Economic Research and Analysis, 12/9/11; example calculation based on laws for tax year 2011)
- In 2009, 460,000 taxpayers wiped out their state income tax bill through the standard or itemized deductions. They had high medical expenses, large amounts of mortgage interest, or other deductions. (Arizona Department of Revenue, email information from Office of Economic Research and Analysis, 12/9/11)
- Taxpayers don’t pay state income taxes on some types of income, including social security retirement benefits, and active duty military pay.
- 8 out of 10 Arizonans pay more in state and local sales taxes than in state income taxes. (Institute on Taxation and Economic Policy, Who Pays? November 2009)
- Many families with very low incomes still owe and pay state income taxes. In 2010, a family with two parents and two children owed state income taxes in Arizona if their total income was $23,600 – just $1,300 out of poverty. (Center on Budget and Policy Priorities, The Impact of State Income Taxes on Low-Income Families in 2010, November 2011)
- The richest 1% of families in Arizona pay $5.60 in state and local taxes for every $100 in income. The poorest 20% pay $12.50. (Institute on Taxation and Economic Policy, Who Pays? November 2009)
For a more complete analysis, see Skin in the Game: Who really pays Arizona taxes?