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Taxes and tax policies have always been points of political contention.  In today’s age of record deficits and unsustainable governmental spending even further separation exists when it comes to tax issues.  Some believe that the rich should be taxed to alleviate deficits; while other believe a collective, uniform effort is required on the behalf of all taxpayers.  All however, agree the first step is for government to stop the runaway spending as it promised to do in January of 2009.  It is obvious that government’s addiction to spending will continue to go unabated and as it does the taxpayer will increasingly be put upon to offset damages as both state and federal governments struggle to maintain their abilities to continue operations.  One such strategy is the flat tax.

In Arizona, a flat tax legislation proposal moved forward on Thursday in the Senate Finance Committee chamber in a 4-2 vote, completely along party lines.

The Flat tax made simple

The Arizona flat tax is exactly what the name implies.  Currently, tax rates range from 2.59% to 4.45% as it increases for higher incomes.  The flat tax will change the tax rate to 2.13% for all income levels.  On the surface it would appear that all are winners, but accompanying the flat tax is the loss of critical exemptions and deductions.  While all will fall into a lower tax rate, far more will be required to “pay” taxes without the exemptions and deductions that fuel their returns.  In short, 88% will pay more in taxes and 12% will pay less.

Sponsors of legislation claim that those paying higher taxes would not pay more than $200 while those with higher income earnings will save an average of $918. 

The dispute around this legislation stems around the opinion of what citizens are required to be held financially responsible for the state’s poor solvency.  Some groups feel that placing a greater portion of this responsibility on middle and lower income families is unfair as it is felt that the $200 now owed to the state is needed for life’s necessities.  It is further felt by opponents that the tax burden is the responsibility of the higher income earners.  Proponents feel that is the best way of imposing income tax because everyone pays the same rate.

The bill, HB 2636 retains most tax credits, but eliminates several deductions and exemptions such as mortgage interest, dependent children, and personal exemptions. 

How it breaks down.

The higher income earners pay less and that aspect alone has caused outrage in many groups as it is viewed as a tax break to the rich.  The problem is that the design of the system actually taxes by the percentage of the population's income earning levels, not income alone which tax rates are currently based upon.  In doing this, the "average" person bears the bulk of responsibility, not the elite earners. This is shift in paradigm for taxpayers who are not conditioned to think in terms of equal shares, but think in terms of relative proportions.  For the legislation, this will likely be toughest hurdle to overcome. 

Assuredly, the legislation will be attacked because the gap between the rich and poor is ever widening.  This has led to resentment against the rich driven by political rhetoric.  It is felt that those with less should pay less; not a fair share proportional to their income.  Welcomed is the concept of a lower tax rate; until it requires more to be paid.  The reality is a simple one.  Until spending is brought under control, the taxpayers will be required to pick up the tab.  Less governmental spending falling under control, legislation such as this is just the beginning.

Published March 25th, on Examiner

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In another controversial legislative move, the Arizona lawmakers are again in the national spotlight. This time for the Arizona House passing a provision that would require Presidential Candidates to provide proof of their constitutional eligibility to run for the presidency in 2012 if they wish to appear on the state's ballot.  (Read more).

Published April 21st, 2010 10:23 am MT on Examiner.