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Report: AZ’s Low-Income Have Most “Skin” in Tax Game

January 27, 2012

PHOENIX - A new report challenges the notion that the poorest Arizona families don't pay their fair share of taxes, one of the arguments for a flat state income tax.

Dana Naimark, president of the Children's Action Alliance, says its analysis shows Arizona's wealthiest 1 percent pay less than half the rate of low-income Arizonans in state and local taxes.

"They're paying $5.60 in taxes out of every $100 in income - $5.60. Now, you compare that to families earning less than $20,000 a year. They're paying $12.50 for every $100 in income."

At the same time, Naimark says, Arizona's tax code allows nearly three out of four corporations to pay the legal minimum of just $50 a year in taxes.

She says the report was inspired by a flat-tax proposal in the Legislature last year that would have cut taxes for the wealthiest 12 percent and raised taxes for everyone else.

Naimark says a graduated income tax is necessary to compensate for Arizona's high sales taxes, which most heavily impact those with low incomes.

"You've probably heard some people say, 'Well, we need a flat tax so everybody pays the same.' But in fact, those different income-tax rates are a mirror image of what happens in the sales tax. Lower-income families pay a much higher proportion of their income in sales taxes."

The report notes that corporations have a shrinking share of "skin in the game" as well. Naimark says the state is phasing in cuts to corporate income and property taxes which eventually will cost the state $800 million a year in revenue.
"That number would be enough to go back to funding full-day kindergarten statewide, helping families afford child care, providing health insurance to children in working families, building and repairing schools and buying new equipment."

Republican legislative leaders contend the tax cuts will spur economic growth and jobs, which in turn would raise state tax revenues.

The full report, "Skin in the Game: Who Really Pays Arizona Taxes?" is available online at azchildren.org.

Doug Ramsey, Public News Service - AZ