Friday, February 5, 2010

Goldwater Institute: Phoenix food tax increase a sign of failure

On Sept. 11, 2007, Phoenix voters were asked to approve an 11 percent increase on the general sales tax that, it was promised, would result in 500 more police and firefighters. On Tuesday, the Phoenix City Council voted to impose a five-year, 2-cent sales tax on food purchased from grocery stores - to save the jobs of 500 police and firefighters. Media reports say Phoenix officials intend to use the food tax revenues to stop staffing cuts announced in January for the police and fire departments.

taxTaxes are a poor substitute for doing the heavy lifting of re-thinking, reorganizing, and re-prioritizing government. Phoenix City Councilman Sal DiCiccio has pointed out that the average cost for a Phoenix city employee is $100,000. In just the past six years, the City of Phoenix budget grew by 59.6 percent, more than double the sum of inflation and population growth.

The current economic downturn started early in 2007, but the fiscal 2010 budget was the first time that Phoenix actually reduced overall spending. Operating expenditures were cut by just 0.6 percent. The General Fund budget, currently only 44 percent of the total budget, saw its first reduction in fiscal 2009.

Clearly, there is a failure by the City of Phoenix to address fundamental reform in the face of shrinking tax revenues. Public safety should be the city's first priority for funding, not an afterthought that depends on the promise of additional taxes. Many of the funds in the city's total budget are dedicated for various purposes such as public art.

Phoenix Mayor Phil Gordon said it's possible the council could cancel the food tax after hearing from the public during budget hearings in the next few months. Perhaps now is the time to ask the voters for their priorities.

Dr. Byron Schlomach is an economist and works as the Director of the Center for Economic Prosperity at the Goldwater Institute.

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