UPDATE: WE'RE STILL BROKE
More bad news on the state financial front: Overall February tax collections for the state were 33.4 percent below February 2008 collections—a staggering drop, but a bit deceptive, because the state's formula for paycheck deductions follows the federal lead.
Since Uncle Sam is deducting less from your paycheck as part of that recent stimulus plan, Arizona is deducting a little bit less, too. Lawmakers are working on legislation that would fix that in order to bring revenues back up a bit.
Key takeaways from the latest report from the Joint Legislative Budget Committee:
• The $403.4 million collected in February was $73 million less than the state had projected, which means the budget problems are getting worse, not better.
• This is the 14th straight month that revenue has dropped compared to the same month the year before, so we haven't hit the bottom yet.
• Compared to one year ago, sales-tax collections were down nearly 18 percent in February.
• The JBLC crew now estimates that the fiscal year that ends on June 30 will have a $510 million shortfall. They suggest that the state look to trim $650 million between now and then, just in case the economy continues to sour. Any savings can be carried forward into the next fiscal year.
• Next year's shortfall is now estimated at $2.93 billion.
All of this bad budget news comes as the federal government is breathing down the state's neck to restore education cuts and make changes in health-care qualification requirements.
SPREADING THE WEALTH AROUND
Part of the budget plan released by House Democrats last week calls for a 10 percent increase in income taxes on Arizona's top filers, a move that would bring the state an estimated $80 million.
The usual suspects have come out against the increase, saying it will punish success, damage the economy and lead Arizona's richest residents to flee.
But let's crunch the numbers. (We know it's wonky, but what the hell—it's tax season. Stay with us.)
The Democratic plan would increase rates for taxpayers who have a yearly adjusted gross income of more than $200,000. That amounts to roughly 65,000 of the nearly 2.5 million people filing taxes in Arizona, or about 2 percent of Arizonans, according to an analysis by the Arizona Department of Revenue. The tax increase is steeply progressive: Those who earn more than $1 million a year—around 5,000 households in Arizona—would pay about $57 million more in taxes.
Is that too much to ask? Well, it's certainly what Joe the Plumber would call "socialist," and what Barack Obama would call "spreading the wealth around." But when you get right down to it, that's pretty much the same rate Arizona's wealthiest were paying in 2004, and the economy seemed to be doing a lot better in those days.
The income-tax cut of 2006 was probably Gov. Janet Napolitano's most damaging budget deal with GOP leaders. It got them to go along with her spending plan, but it helped set the stage for the budget mess we're in today—and the richest Arizonans got a lot more out of it than the poorest.
SPEAKING OF SOAKING THE RICH ...
U.S. Sen. Jon Kyl scored a victory last week when legislation that he co-sponsored that would provide a big break in the estate tax survived in the Senate, with the help of some Democratic defectors. It's kind of like a stimulus plan for people who don't want to pay taxes on money that someone else worked hard to earn.
Estates worth more than $3.5 million are now hit with a 45 percent tax. That means heirs get the first $3.5 million tax-free and pay a 45 percent tax on the remainder. That hits about three in every 1,000 estates, according to the analysts at the Center on Budget and Policy Priorities.
Kyl's plan would crank up that exemption to $5 million and reduce the rate to 35 percent. The cost: about $750 billion over 10 years. Gee, that kind of money would go a long way toward paying back the money that U.S. taxpayers had to shell out to rescue all those rich bankers who got us into this financial mess in the first place. Sounds fair to us.
We don't know how this one will go in the House—and we didn't get calls back from Democratic Reps. Gabrielle Giffords and Raúl Grijalva to find out where they stood on it—but Kyl's gigantic tax break for the rich ought to get shot down. After all, if there's anyone who should be able to help get out of our insane federal debt, it's the ultra-rich, especially if we're not taking their money until after they've died.
SCRAMBLEWATCH 2010: WELCOME TO THE PARTY
After she first won the Congressional District 8 seat in 2006, GOP leaders quickly coalesced behind state Sen. Tim Bee as the man to challenge Democrat Gabrielle Giffords.
But Giffords clobbered Bee in 2008, and there's no rush among established Republicans to challenge Giffords in 2010.
That could change if the national mood shifts significantly over the next year, or if Giffords does something monumentally stupid. But at the moment, Obama's popularity remains high, and GOP ratings remain low, so GOP congressional candidates with real potential are holding back rather than leaping into the fray.
That has left the door open for fresh faces, including Jesse Kelly, an Iraq war vet who announced last week that he would be challenging Giffords.
SCRAMBLEWATCH 2009: THE GOP STRIKES BACK
Speaking of fresh faces: Steve Kozachik has been brave enough to launch a Republican campaign against Democrat Nina Trasoff in this year's city election.
Provided he qualifies for the ballot, Kozachik, a project manager with the UA Athletics Department, will be using morning daily reporter Rob O'Dell's City Council coverage to craft a list of reasons why it's time for Nina to go.
Kozachik will be handicapped by a GOP brand in an overwhelmingly Democratic town. So far, he's the only Republican to show much interest in the 2009 election.
The big winner of the race might be Ward 3 Councilwoman Karin Uhlich. Uhlich and Trasoff—along with Ward 4's Shirley Scott—have been weighing their chances of winning a Democratic mayoral primary when Republican Mayor Bob Walkup's third term ends in 2011. If Trasoff were to take a beating in a campaign this year, that could damage her brand, which helps Uhlich out.
Of course, a lot of calculations would change if the city goes to nonpartisan elections, as a bill by Sen. Jonathan Paton would require. But with legislation stalled at the Capitol until the budget is done, that proposal might not get a hearing until next year.
Radio ringmaster John C. Scott is on the move again. Our favorite fast-talker, who has been doing talk radio in this town for about two decades now, has moved back to KJLL AM 1330, where he's serving as station manager.
He's still got his talk show, from 3 to 5 p.m., Monday through Thursday, and 3 to 4 p.m. on Friday. More details over in Media Watch.
Find early and late-breaking Skinny and more at The Range, our all-new daily dispatch at blog.tucsonweekly.com.