Critics of the state’s 1-cent sales tax initiative argued today that its passage would make it all but impossible to simplify the state’s sales tax code.
That means losing out on the chance to tax Internet sales, said Kevin McCarthy, president of the Arizona Tax Research Association, which is opposed to Proposition 204.
But the chairwoman of Quality Jobs and Education, the group behind the ballot measure, said nothing prevents lawmakers from going after Internet sales taxes or broadening the sales tax base.
If Prop. 204 is approved by voters, the state will collect revenues from the new tax when the current 1-cent tax expires next year.
In effect, the proposition maintains the current 6.6 percent sales tax. It is expected to generate about $1 billion each year, the bulk of which will go to schools.
The charge that the 1-cent initiative would undermine efforts to streamline the state’s sales tax scheme is not new.
But to highlight the initiative’s alleged flaws and unintended consequences, critics have zeroed in on its effect on the debate over whether to collect Internet sales.
By doing so, opponents hope to raise doubt in voters’ minds about the initiative’s long-term implications on Arizona’s finances.
McCarthy, who is part of a task force that Gov. Jan Brewer created to simplify the state’s sales tax code, said if the initiative were successful, the task force’s work “will be for naught.”
“The opportunity to fix that system goes away if Prop. 204 passes and it will not come back until someone goes to the ballot and takes that out of the state’s statute,” McCarthy said during a debate organized by the Arizona Business and Education Coalition.
The problem with keeping the sales tax at a higher rate is that people already can evade paying it by buying products on-line, McCarthy said. He predicted that revenues from the sales tax will diminish if online stores aren’t compelled to collect taxes.
But Ann-Eve Pedersen, who is leading the “yes” campaign, countered that while she agrees that people are shifting to online purchases, nothing in Prop. 204 precludes lawmakers from taxing Internet sales.
“So they can broaden the base as much as they like,” she said.
The initiative also doesn’t prevent policymakers from making changes to the sales tax base, although they cannot amend the one cent that Prop. 204 will put on the books, she said.
McCarthy said in that case, Prop. 204 creates two tax bases: the one-penny tax that is beyond lawmakers’ reach, and the rest of the sales tax that lawmakers can change.
McCarthy and Pedersen were the only speakers at today’s debate in Phoenix.
Pedersen said the idea that the initiative will lock in a 6.6 percent sales tax base is another bit of misinformation that’s being peddled by opponents. She said although the ballot measure puts the one-penny tax beyond lawmakers’ reach, they’re free to lower, broaden or make other changes to the rest of the sales tax base.
She also said the opposition continues to spread myths about the proposal to confuse voters and to draw the business community’s support from Prop. 204.