Larsen Baker LLC is a small business in Tucson (30 employees). Like for many of you, my business is a very important part of my life. My employees are my friends.
I have zero interest in who my friends and co-workers vote for. That’s their business.
But in every election cycle, it seems like some special interest group puts a proposition on the ballot that will damage the Arizona economy. This year it’s Proposition 208. I believe business owners have a compelling interest in calling their employee’s attention to ballot propositions that will hurt the economy, and – by extension – hurt their employees.
Proposition 208 is a referendum by #RedforEd that will nearly double the state income tax rate for single filers earning more than $250,000/year and joint filers earning more than $500,000/year. It is a 77% increase in the tax rate on successful small business owners because most small businesses are “pass-through” entities.
Now is not the time to join high tax states like California, Illinois, New Jersey and New
York. It’s not just the rich who will pay. Half of those whose tax rates will be increased are small business owners, who cannot absorb a 77% tax increase.
Arizona is poised to be the economic beneficiary of the growing out migration of businesses from those high tax states. Those businesses want to relocate to more “business-friendly” states. Arizona is (was?) one of those states.
But that won’t happen if Proposition 208 passes this November. The states that will benefit if we become a high tax state are: Texas (no state income tax), Utah (4.95% top state income tax), New Mexico (4.9% top state income tax), Nevada (no state income tax) and Florida (no state income tax). Hundreds of companies, large and small, are relocating from high tax states. They will not be relocating to Arizona if we start taxing businesses at the same high rates of the states they are fleeing.
Public schools need more public funding, but there are ways to fund our schools that will be less damaging to Arizona’s future than Proposition 208. I think we small business owners should point out to our employees the hidden problems with Proposition 208.
I have attached a summary of a report "Arizona Proposition 208 Loses Jobs and Harms Small Businesses by economists Dr. Art Laffer, Stephen Moore and Dr. Erwin Antoni that claims that Arizona would probably lose ±200,000 jobs if Proposition 208 passes. Wage growth would decline in the state. Average household income would likely be ±$6,000 lower because of this tax hike. It isn’t only the rich that will bear the burden of this tax. It will be all of us.
Sincerely,
George C. Larsen, CCIM