When U.S. Sen. John McCain came to Tucson recently for a few town halls, the Republican made the pitch for flattening the tax code, saying no one understands the darn thing.
But ask Democratic state Sen. Paula Aboud and she contends a wholesale flattening isn't the answer - unless folks are all excited about shifting taxes from the wealthy to the middle class.
With a flat-tax proposal getting some traction last legislative session, and with a good chance some iteration of it will be back next session, Aboud is hosting forums all across Southern Arizona in what she calls an attempt to educate voters about the implications of flattening the rates.
The first one, which will feature an economist from the University of Arizona, as well as a certified public accountant and members of the nonprofit community, will be Monday in Tucson, with another following Tuesday in Bisbee.
Aboud said she's been told the subject is a little wonky for the masses, but that's not how she sees it.
"Ordinary people out there are unaware they could get hit with a tax increase. I just want to wake people up to this tsunami that's going to hit them," she said.
"When you tax consumers, you're pulling money out of the economy and that's not what Arizona needs."
No one on the panel favors the change, she concedes, and said she isn't sure she'd invite them even if she had any takers. "The Republicans have a lock on the Legislature. They can bring forward any bill and talk about any bill, so they have the forum day in and day out."
She said this round of forums will explain the impacts and perhaps later she will consider a pro-con setup in preparation for the legislative session.
Mesa Republican Rep. Steve Court, the sponsor of last year's effort, said he found it "unfortunate" Aboud didn't set up a balanced panel. "If she had, her constituents would be better informed on this issue," he said.
Court said last year's effort, which he withdrew in the face of opposition after it passed the House and a key Senate panel, was merely a starting point. He said he understood the draft needed more work and is currently meeting with interested parties to look at different models.
"The overall goal is to reform our tax code in a way that lowers the tax burden on Arizonans and that makes our tax code simpler and fairer," he said.
Last year's model would have phased in a single tax rate of 2.13 percent over three years, broadening the base by wiping out deductions, but not tax credits.
The state Department of Revenue determined 88 percent of Arizonans would see a tax increase under the plan. It's not until taxpayers make more than $100,000 a year that they would start seeing their tax liabilities shrink.
The bill ran into trouble when interest groups realized standard business deductions would go away, as would breaks on home mortgage interest and charitable contributions.
Steve Slivinski, a senior economist at the Goldwater Institute who supports flattening the tax, said cost shifts from the wealthy to the less wealthy are inevitable in any move away from the progressive tax structure we have now, where the wealthy pay a higher percent.
Slivinski said the question is whether those on the upper end will invest those freed-up revenues to generate more economic growth and hire more workers.
He said there are ways to address the concerns about cost shifts. There's no reason the code couldn't still exempt the very low wage earners, he said. There's probably a way to retain some of the popular deductions, such as for mortgage interest or charitable giving - although the more concessions that are allowed, he said, the more it works against a true flattening of the code. The other option to explore, he said, is to have a dual track system, where taxpayers could decide which system they wanted to use.
University of Arizona economist Marshall Vest, who will not be on Aboud's panel, said he understands simplifying the tax code is an appealing pitch, but argues the complexity of the tax code is overstated in many ways.
He said voters need to clearly consider the winners and losers of such a system. "And what you'll see is those with lower incomes will be adversely affected, while those in higher income brackets will see higher gain. Will those people at the high end invest in more jobs? There's no easy answer.
"The devil's in the details, but I don't think voters are going to like it very much."
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If you go
Flat-tax forum. 6:30 p.m. Monday at Temple Emanu-El, 225 N. Country Club Road.
Contact reporter Rhonda Bodfield at rbodfield@azstarnet.com or 573-4243.
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