Arizona Sales Tax Slowdown Expected To Impact Budget
Arizona’s state budget is expected to take a huge hit amid the economic downturn caused by the pandemic. Revenue streams could decline in our state sooner than in others.
A greater portion of Arizona’s tax revenue comes from sales or fuel taxes than in most other states. Carl Davis, research director with the nonpartisan Institute on Taxation and Economic Policy, said that puts Arizona in a more vulnerable position right now.
“The sales tax gets hit first, so that’s your first concern, there’s an immediate revenue problem," Davis said.
While income taxes and other revenue streams will likely decline down the road, the slowdown in sales and fuel taxes is already here. Davis said in past recessions, consumer spending slowdowns have begun with the people who lose their jobs or are worried about their personal finances, while people in more comfortable positions keep spending. He said the social distancing regulations important for slowing the spread of COVID-19 will make an unprecedented impact on consumer behavior because even those who have money don’t have many options for going out to spend it.
As more Arizonans stay home and fewer people are driving, the fuel taxes that typically fund infrastructure projects will also decline, Davis said.
"That sector employs a lot of people, so if the money isn’t coming in through the gas tax to keep road work and bridge repair underway, that could mean fewer construction jobs," he said.