Wednesday, February 4, 2009

Goldwater Institute: Arizona can be leader on world stage

With a gross state product of $247 billion, Arizona's economy ranks with Hong Kong and Switzerland, two of the world's leading financial hubs. Our productivity exceeds the oil-rich United Arab Emirates and 187 other nations. On the world stage, Arizona is a player.

Grand CanyonOur Southwest location opens the door to particular opportunities from tourism and mineral production to electricity generation. But we need not be limited to innate advantages. Ireland, India and today's economic engines aren't products of a natural-resource jackpot, but the end results of deliberate decisions.

We should first embrace a tax structure that values all businesses, staying away from subsidizing particular sectors. About 100,000 small businesses form the backbone of Arizona's economy. The birth of small businesses is the largest determinant of gross state product and employment across the states.

Regrettably, Arizona's corporate income tax rate of 6.9 percent comes on top of the near 40 percent federal rate. The combined 47 percent rate means Arizona companies pay higher rates than businesses in 29 OECD (Organization for Economic Co-operation and Development) countries. Nearby, Nevada has no corporate income tax and Colorado and Utah charge 5 percent or less. Every day that passes without reform, we become a relatively less attractive place to do business.

Reforming education is also critical. Arizona students sit on the low end of a national system that has fallen decisively behind the rest of the world.

Yet successful schools abound. From the award-winning BASIS charter schools to the Arizona School for the Arts, Arizona claims some of the most talented educators anywhere. These successes bring to mind the saying, "A prophet is not without honor, save in his own country." Let's recognize the strengths of our reforms and embrace them wholesale.

Finally, we should watch where we hitch our wagon. Arizona already depends on federal funds for about half the budget. Federal funds usually displace the Legislature's authority to act on its own and reduce our flexibility to address local problems with local solutions. We should seek federal waivers when possible.

The federal government also increasingly is an unreliable funding source. Its monumental structural deficit will require tax increases or program cuts soon. We can play it smart by paying as we go and striving for greater self-reliance now.

Arizona is already a player on the world stage. Whether her role will ultimately disappoint or inspire is ours to write.

Darcy Olsen is president and CEO of the Goldwater Institute. A version of this column first appeared in the Arizona Republic.
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