Proposition 100 sales tax expires Friday

May 31, 2013

Arizona’s temporary sales tax increase expires Friday. Voters in 2010 approved Proposition 100, which upped the state sales tax by a penny on the dollar for three years.  The tax has impacted Arizona and its economy.

Lance Muzslay stacks shoe boxes in the back room of one of his stores. He is the co-owner of Sole Sports Running Zone, and opposed Prop 100 when it was on the ballot three years ago. But he said, looking back, he did not really notice a significant change in sales once the tax went into effect.

"If we had transactions that were more along the lines of $1,000, like if we were dealing with expensive electronic items, that would probably make a bigger difference. But, we’re in the $100 price range for an average-priced pair of shoes," Muzslay said.

Lance Muzslay of Sole Sports Running Zone Lance Muzslay says he hasn't noticed too much change in business since Prop 100 went into effect. (Photo by Mark Brodie - KJZZ)

Muzslay said he is more concerned about competition from online retailers than an extra penny on the dollar in Arizona, and while Prop 100 supporters acknowledged higher taxes were not ideal, they warned without them, schools would face deeper spending cuts.

"We already knew that dire cuts were coming down the pike, and we know that without the passage of Prop 100 it would be even worse," Assistant Superintendent of Business and Support Services for the Mesa Public Schools Bobette Sylvester said.

Sylvester said even with the extra money, Arizona’s largest school district still had to let teachers go and forgo building repairs and new textbooks. But, she said Prop 100 saved some jobs and programs.

"Certainly, we now breathe a little bit easier, that we know we’ve hit the bottom, and we have bottomed out, and we’re starting that peek just above the rim to start climbing, but certainly there’s no great excitement that we will move forward back to where we were prior to 2008," Sylvester said.

Before the vote, legislative budget analysts estimated Prop 100 would bring in roughly $1 billion a year for the three years it would be in effect. The state Department of Revenue said it collected about $835 million in the first year, more than $910 million in the second, and about $800 million so far this fiscal year, with two months to go.

Valley Economist Alan Maguire said had the state not brought in that extra cash, Arizona’s economy would have likely faced long-term problems. Maguire supported Prop 100 three years ago, and believes it has also indirectly helped bring down the state’s unemployment rate.

"What the temporary tax did was it gave people a sense of assurance that Arizona was gonna be moving forward in a rational, calm, orderly fashion, and that encouraged businesses who might otherwise have been afraid to invest in Arizona to invest in Arizona," Maguire said.

Maguire said those business investments ultimately turn into jobs, and Gov. Jan Brewer has recently touted several jobs announcements with companies including General Motors and GoDaddy. Sylvester said while taxes are a factor in businesses deciding to expand or re-locate, they are not the only factor.

"They’re also looking for that counter-side of it, is there a qualified, educated workforce to be able to support the industry," Sylvester saids.

Sylvester said that would have been harder to produce with deeper spending cuts in education, and Prop 100 critic Tom Jenney agreed there would have been more cuts had the measure failed. But, the Arizona Director of Americans for Prosperity said it hurt Arizonans who lost their jobs in the recession and then faced higher prices because of the tax.

"These are real costs for real people, so I don’t want to discount that actual people were harmed in the process of having this temporary sales tax hike. But, when you’re looking at a $1 billion tax per year, and a temporary one, on a $250 billion economy, the reality is is that was not gonna push us over the edge into an economic crisis of any kind," Jenney said.

Back at Sole Sports Running Zone, Muzslay said just as the tax going into effect did not really change business, he doe not think the tax expiring will have much impact either.

"We may not see a significant change in sales due to this 1 percent increase or decrease. It would be nice if we do," Muzslay said. "I’m not optimistic that’s gonna move the needle a whole lot."

Muzslay said while it seems the extra money from the tax likely had a positive impact on Arizona, he wishes the state had not put the burden of raising it on retailers.

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