Fife's Myth

Symington's tax cuts had little or nothing to do with Arizona's economic boom, which isn't as robust as it's made out to be

Punch the words "Fife Symington" and "tax cuts" into a popular-newspaper database, and more than 1,000 articles will be cited.

The articles, most of them from the Arizona Republic, invariably attribute Arizona's robust economy to Symington's strong support of personal income tax cuts during his six-year tenure as governor.

"Governor Symington has done an excellent job for the Arizona business community and all of Arizona, which can be witnessed by the tremendous economic growth and tax cuts," Tim Lawless of the Arizona Chamber of Commerce said in a typical salute to the ousted governor in the aftermath of Symington's September 3 federal fraud conviction.

The day after a federal jury branded Symington a criminal, a Republic editorialist moaned that Symington's felony convictions will "allow his enemies to dismiss, trivialize and ignore the extraordinary good he did--including historic tax cuts (a catalyst for Arizona's booming economy) . . ."

Symington and his Republican supporters in the state Legislature say six years of tax cuts totaling more than $1.2 billion--with another $1.5 billion in cuts slated for the next two years--are the antecedent of Arizona's prosperity.

Conservative lawmakers say Arizona's ability to collect steadily higher revenue even as personal and corporate income tax rates have been cut is proof that tax cuts are the holy grail.

"That's why we should continue cutting taxes," says Senator Scott Bundgaard, Republican from Glendale, Finance Committee chairman and one of the architects of the latest trim, a $110 million income tax reduction approved last summer.

Perhaps these Symington fanatics are rationalizing their unbending support for a governor who resigned in disgrace and is very likely to wind up in prison.

These people may believe Symington is the "catalyst" if they wish. Documenting that claim is another story entirely, because most economists say the Symington tax cuts have had little direct impact on Arizona's booming economy.

"It's the icing on the cake, not the cake itself," says Elliot Pollack, former chief economist for Valley National Bank and now a private economist who is unabashedly bullish on Arizona's economy.

"The economy would have grown rapidly anyway," he says. "Did it [tax cuts] help? Yeah, it helped. But there is no way to measure how much."

Academic economists agree with Pollack's assessment.
"I think we would have had reasonable growth in any case," says Tracy Clark, an economist at Arizona State University's Economic Outlook Center. "I think it is clear the tax cuts did accelerate growth somewhat, but I just can't tell you how much, nor can anyone else."

Symington was the beneficiary of a surging national economy, which fueled migration and helped bring Arizona out of the extended real estate recession of the late 1980s.

"The westward migration is certainly something that has happened all century long, and there is no reason to think that would stop," says Arizona Public Service Company economist Pete Ewen.

And it didn't.
Arizona returned to population growth rate of 2 percent or more during Symington's tenure, which began in March 1991. The surge of newcomers fueled the economy and triggered increased tax collections even as Symington and the Legislature were cutting tax rates.

It was the best of both worlds for an incumbent governor, and Symington embraced tax cuts secure in the knowledge that the tax revenue provided by more than 80,000 new residents a year would keep the state treasury flush--especially as spending for social services and education remained below national average.

The tax cuts boosted Symington's political capital and provided a distraction from his own legal and financial problems.

Yet Symington and his tax-cutting policy have had little stimulative impact on the economy--and appear to have further damaged Arizona's crumbling infrastructure.

"The reality is no state governor or state legislature has a lot of effect on the state's economy," says Tom Rex, an economist at Arizona State University.

The dominant force in shaping Arizona's economy is the nation's economy.
"First of all, you would have to say the U.S. economy is growing pretty well," says Ted Ferris, former director of the Joint Legislative Budget Committee and now Governor Jane Dee Hull's deputy chief of staff.

"It is hard to run counter to the U.S. economy," says Ferris, who as head of JLBC was immersed in details of the state's cash flow.

There is no doubt Arizona is enjoying the coattails of the national expansion. State coffers continue to receive more money each year even as personal and Arizona's corporate income tax rates are cut. The state ended fiscal 1997 on June 30 with a whopping $550 million surplus. The surplus is in addition to $247 million the state has set aside in a "budget stabilization fund" to help ease the next economic downturn.

The surplus is accompanied by continued strong population and job-growth rates. As of April, Arizona was second in the nation in creating new jobs and, not surprisingly, second in single-family housing permits for the first five months of 1997 at 13,111.

The euphoria surrounding the progression of positive economic reports makes it exceedingly easy to overlook negative information that indicates rapid economic growth is not necessarily good. In fact, Arizona's boom appears to be having a negative impact on personal-income growth.

Arizona, Montana and Vermont are the only three states where the poverty rate increased in the last year. Arizona's rose to 18.3 percent, up from 16 percent in 1995. The spike in poverty is reflected in Arizona's anemic personal-income growth.

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