The state of Arizona is in the midst of budget problems, not unlike other states in the country. Instead of following their neighbor to the west, the state is cutting taxes. Property tax relief and cuts in the income tax rates in exchange for a temporary increase in state sales taxes are being proposed by the legislature. The Arizona state budget has $1 billion shortfall. And, as they have witnessed California trying to fix budget deficits with tax increases, the supply-side approach should encourage business formation and help plug the hole in its current budget.
It does seem odd that we need to continue learning the lesson of supply-side economics despite having 30 years of history which proves it works. Let's hope the state of Arizona learns that in order to fund government, it must have an expanding and vigorous business climate with the government keeping taxes low and a less intrusive regulatory environment.
Killing the goose that lays the golden egg (as California has done with more taxes and excessive regulations on businesses) will cause perpetual budget shorfalls. All of this while businesses and the productive class flee California for a state that is more business-friendly.
The Wall Street Journal has the details.
