Tax Policy and the Race for the Governor's Mansion: Arizona Edition


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Voters in 36 states will be choosing governors this November. Over the next several months, the Tax Justice Blog will be highlighting 2014 gubernatorial races where taxes are proving to be a key issue. Today’s post is about the race for Governor in Arizona.

The dust has temporarily settled in Arizona where a Republican gubernatorial candidate emerged last week out of a crowded field of six people vying for the top job in the Grand Canyon State.  Doug Ducey, currently Arizona’s state treasurer and the former CEO of Cold Stone Creamery, will be facing Fred DuVal(D) in November’s election. 

Tax policy was a key issue in the run-up to the primary with four of the six candidates promising significant tax cuts if elected and will continue to play a central role in the months leading to November.  The state budget will likely end the year $300 million short of needed revenues and a court-ruling issued last month on K-12 school financing means lawmakers will need to come up with $316 million in additional education funding next year and more than $1.6 billion over the next five years. It goes without saying that Arizona’s fiscal situation is not very pretty and whoever is elected will have his hands full from the start.

Despite this backdrop of spending and revenue pressures, Ducey wants to gradually eliminate Arizona’s personal and corporate income taxes, but has yet to say how or if he would replace the more than $4 billion the state would lose if his plan is enacted or how he would raise the needed revenues for the education court mandate. Duval says the idea of repealing the state’s income taxes is not realistic given the needs in the state and intends to make Ducey divulge more details about his tax cutting plan. 

If Ducey wins in November, he will likely lead Arizona in the direction of Kansas and North Carolina where significant tax cuts are coming up short.  In fact, revenue in both states has come in far under projections and bond rating agencies think Kansas’ poor recent fiscal management makes the state less credit-worthy. Standard and Poor’s downgraded the state’s credit rating last month, meaning that every time the state chooses to borrow money to fund long-term capital investments such as roads and bridges, it will cost the state more to do so. 

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