Arizona Policy Choices

Balancing Acts: Tax Cuts and Public Policy in Arizona

Taxes: The Eternal Debate

Nancy Welch, Senior Research Analyst
Morrison Institute for Public Policy

Southwestern writer Lawrence Clark Powell once observed that "Arizona is a young state in an old land."1 Settled for centuries and for some time part of Mexico, Arizona became a U.S. territory in 1863 and the forty-eighth state in 1912. Arizona's separate entry into the Union (one option had been joint statehood with New Mexico) was notable for its constitution in which 51 Democrats and 11 Republicans included the initiative, referendum, and recall.

In his initial address to the state legislature, George W.P. Hunt, Arizona's first governor, advocated agricultural education, old-age pensions, workers' compensation, and a merit system for state employees. Clearly, building a state would require more revenue than administering a territory. Thus in a place that valued both development and citizen participation, taxes and spending were guaranteed to be eternal topics of debate and a battleground for proponents of competing philosophies of government and special interests.

For example in 1931 a group of citizens organized in Globe because taxes were "out of proportion to the increase of population and to the actual needs of good government."2 The sales tax of 1933 was challenged in the Arizona Supreme Court and subsequently revised. Powerful mining, agricultural, and railroad interests "weren't about to stand for somebody raising their taxes foolishly"3 and dominated debates and the legislative-appropriation process until the state established an executive-based budgeting system in the mid-1960s.

Plus, in 1978 an initiative for an amendment to the Arizona constitution which would limit spending to seven percent of the state's personal income passed. This was just one of a number of limitation options considered over the years. After years of discussion, residents voted in 1980 to remove the four percent sales tax on food. The 1992 voter-approved Proposition 108 resulted in a mandate that all state-tax increases be approved by a two-thirds majority in the Arizona House and Senate.

Throughout the state's history, Arizonans have received a variety of state-tax rebates and refunds and the rates at which various taxes are levied have changed frequently. Indeed, the often session-to-session changes have made it difficult for residents to grasp Arizona's complicated tax system. Taxes, it seems, are always on someone's agenda.

Despite the current assumptions that Republicans and Democrats can never see eye-to-eye about tax relief or investments in the state's future, Arizona's recent history provides some examples to the contrary. In 1977, Republican Burton Barr and Democrat Alfredo Gutierrez said the state's needs should come before Democratic Governor Raul Castro's proposed $84 million tax relief package. "...[T]he legislature decided to spend more money on things like prisons, universities, and public schools. Budget makers had to scratch to come up with the $50.2 million needed for the package finally approved."4

Phoenix Republican Peter Kay helped to lead the fight to exempt food from sales tax, a move which benefitted all Arizonans, and particularly those with low incomes, but also cost the state an estimated $100 million. Even the ever-conservative Arizona Republic supported the effort in "A Doomed Tax," a January 4, 1980 editorial. "For years sentiment has grown to repeal this tax, which undoubtedly bears most heavily on the poor.... This is one problem that has been around long enough."5 Arizona voters approved the repeal in June 1980 as a part of a ten-proposition tax package which was described later as "a massive reform in the state's tax structure."6

Taxes are certainly not just a topic for the 1990s. There is every indication that the debate will continue into the 21st century with each side assuming that their way is best for Arizona.


  1. Lawrence Clark Powell, Arizona: A History (Albuquerque: University of New Mexico Press, 1990), p. xv.
  2. Douglas D. Martin, An Arizona Chronology (Tucson: University of Arizona Press, 1963 1966).
  3. David Berman, "Domestic Policy: Budgeting, Taxing, and Spending" Arizona
    Government and Politics: Quest for Autonomy, Democracy, and Development (Lincoln: University of Nebraska Press, Forthcoming), p. 3.
  4. Grant E. Smith, "Legislature's Last-minute Tax Package Provides Little Relief for Most Citizens," The Arizona Republic (May 28, 1977).
  5. "A Doomed Tax" The Arizona Republic (January 4, 1980).
  6. Don Eklund, Statements Opposing Proposition 106, p. 43.


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