The discussion Hobbs doesn't want to have

Arizona is ripe for a robust debate about state government spending and taxes.

Arizona would benefit from a robust discussion about the future of state government in the upcoming gubernatorial election. However, if Katie Hobbs’s first ad is any indication, and I think it is, we are unlikely to get such a discussion.

Instead, Hobbs is likely to attempt to finesse policy issues and rely instead on biography and anti-Trump sentiment to get her across the finish line.

In her first ad, Hobbs stresses her background, saying that she understands what families go through in coping with hard times because she has experienced it herself.

Fair enough. Even though it doesn’t make sense to me, there’s no question many voters place a value on a sense that a candidate has been a fellow traveler in their lot in life. When affordability is a salient issue, Hobbs’s story of hard work to get her family’s head above financial waters has political resonance. And it is a useful contrast to her likely Republican opponent, sweepstakes winner Andy Biggs.

Hobbs’s first ad touches lightly on some claimed accomplishments as governor. This was the one I found most illuminating: “As governor, she balanced the budget without raising taxes.” This clearly implies that Hobbs opposes increasing taxes in the future. That was her position in 2022. It appears it will also be her position in 2026.

Now, there is a wide and deep consensus in Arizona liberal policy circles that state government is severely underresourced, the erosive effect of four decades of tax-cutting, particularly of income taxes. Arizona continues to lag far behind other states in per-pupil K-12 funding. State funding for all-day kindergarten, a signature accomplishment of the Napolitano administration, has never been restored. The state universities haven’t come close to being made whole from spending cuts enacted to cope with a couple of episodes of declining revenues over the last three decades.

Liberal policy experts and activists think that Arizona’s safety net is woefully inadequate, particularly with respect to childcare, pre-K, health care and other assistance programs for low and lower-middle income families.

Most state agencies cope most years with subsistence budgets. State employees get a modest raise some years, but not others. State government is largely stagnant, without much political room or support for new endeavors or innovations.

There is another point that doesn’t have an ideological hue. State government is way behind in technology. Basically, upgrades only happen when a legacy system is on the verge of failure. Bringing state government into the modern technological world would undoubtedly cost hundreds of millions of dollars.

There are external forces pressing the resource issue. A federal judge has taken over the Department of Corrections’s health care program. A state judge has found that the state is unconstitutionally underfunding district school repairs and renovations.

Addressing the inadequacies of the liberal critique would require a major tax increase of some sort. It can’t be done by balancing the budget without raising taxes. None of the budgets Hobbs has proposed during her first term would make measurable strides toward ameliorating these deficiencies. They only nibbled around the edges of a few of them. Without some major tax increase, that wouldn’t change in a second Hobbs term.

It’s far from clear that such a major tax increase is a political non-starter. In 2020, education advocates referred to the ballot a substantial increase in the state income tax rate for affluent filers. It passed, 52% to 48%. Some legal sophistry by the Arizona Supreme Court kept it from going into effect.

Gov. Jan Brewer got Arizona voters to approve a temporary increase in the sales tax to help state government bridge a sharp reduction in state revenues caused by the bursting of the housing bubble.

Constitutionally, raising taxes through legislative action requires a two-thirds vote of both chambers. No plausible outcome to the 2026 election, however favorable to Democrats, would put that even remotely within reach. However, a Democratic governor and a Democratic Legislature could refer one to the ballot.

I’m confident Hobbs wants no part of this discussion. Instead, she will present herself as a safe manager of the state government status quo and a check on the excesses of a MAGA Legislature. That may be enough. But, then, what is the case for a Democratic takeover of the Legislature? Without greater resources, what is the Democratic agenda for the state?

There is a conservative answer to the liberal critique about the deficiencies in state government and the need for a major tax increase. Even after absorbing the tax cuts, state government revenues and expenditures have grown robustly from any relevant starting point, markedly greater than population growth and inflation.

My conservative critique of the conservative answer is this: Yes, that’s the case, and highly important and relevant. However, instead of plowing increased revenue into improving the performance and sustainability of ongoing state programs, MAGA legislators diverted a large share of it to pork-barrel projects. By and large, ongoing state programs have long been on subsistence support. State government is not in good fiscal shape.

For his part, Biggs says he will abolish the state income tax entirely. I’m in favor of that. Of all the ways to raise revenue for the government, income taxes have the largest negative drag on private sector economic performance.

However, given the condition of state government’s fiscal health, which is shaky at best, replacement revenue should be part of that discussion. Which is a discussion Biggs will not want to have.

I have long advocated replacing both Arizona’s income tax and sales tax with a business gross receipts tax. Such a tax can generate large sums at very low rates. Whatever the size of state government a political consensus would want, a business gross receipts tax could fund it with minimal adverse effects on private sector economic growth.

In a democracy, big issues – such as what state government should do and how to pay for it – should be debated among those who want to lead us. Arizona is ripe for such a debate. Instead, our candidates will endeavor to avoid it, and instead squabble about smaller things.

Reach Robb at robtrobb@gmail.com.