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Our Views: Arizona sales tax Prop. 126 deserves approval

October 14, 2018

State lawmakers don’t appear anxious to expand Arizona’s sales taxes to services, but few want to make a prohibition on additional sales taxes part of the state Constitution.

Prop. 126 on the November ballot would prevent the Legislature from ever taxing services that are now exempt. Those exemptions include all kinds of work, from that of car mechanics to medical doctors.

The main backers of the proposition, the Arizona Realtors, obviously also have an interest in keeping services associated with property sales free from sales taxes.

There hasn’t been a big push by lawmakers to expand the state’s Transaction Privilege Tax, but one doomed bill in 2016 would have taxed more services in the state while reducing income taxes.

The latter item – income tax cuts – may well be the reason tax-cutting Republicans aren’t quickly jumping aboard the Prop. 126 bandwagon. State income tax rates have declined but a strong economy has kept revenues high.

Lawmakers clearly want to have a fallback option should the economy tank. Across the country, in states which reduce or eliminate income taxes, sales taxes are the go-to revenue raiser for lawmakers.

Some argue that higher sales taxes allow residents to have lower taxes because visitors help pay a greater share through sales tax.

There’s another, stronger argument: That both residents and visitors benefit from the service exemption on sales taxes. It’s obvious how residents benefit, as they usually pay no tax on, say, the labor performed for an car oil change. We think that benefits visitors as well, particularly long-term winter visitors.

Depending on their state of origin, the tax exemption in Arizona may make them find that service work is cheaper here. That means they can often save money by delaying car service or medical attention or legal work until they arrive in Arizona.

How much does the state “lose” by not taxing services? The estimates vary but are tallied in the hundreds of millions of dollars per year.

People should get to hold on to that money, not send it in to the state government.

That’s why they should vote in favor of Prop. 126.

— Today’s News-Herald

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