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August 24, 2010

Host: Ted Simons

Arizona Unemployment

  |   Video
  • The latest on Arizona’s jobs market with Aruna Murthy, Director of Economic Analysis for the Arizona Department of Commerce.
  • Aruna Murthy - Director of Economic Analysis for Arizona Department of Commerce
Category: Business/Economy

View Transcript
Ted Simons: Arizona's unemployment rate is at 9.6%. That's according to the state's department of commerce. But if you factor in those who stop looking for a job and folks who are working part-time but want full-time work, the unemployment rate nearly doubles. Here to talk about all this is, Aruna Murthy, the Director of Economic Analysis for the state's Department of Commerce. Good to see you again.

Aruna Murthy: Good to see you, thank you.

Ted Simons: The jobless rate, 9.6%. Who is counted?

Aruna Murthy: People who are available and looking for jobs. So what does that unemployment rate among those people is what that represents. If you stop looking for a job, you drop out, so you're not counted in the survey. You count all the people who are available and looking, as well as those people who are discouraged and part-time workers who want a full-time job, under employed people.

Ted Simons: The folks that are actively searching for employment and are unemployed, anything from part-timers to students, the folks taking early social security, I guess would you call them marginally employed?

Aruna Murthy: That's right.

Ted Simons: OK. How are they counted? How do you get the numbers for all these folks?

Aruna Murthy: The Bureau of Labor Statistics does surveys, and counts those, and they have detailed information on the website. But they do a national survey, and they account for discouraged workers, exact procedure what is followed, handled by a different person in my department, and he should be able to speak more to the details on that. But they essentially all that information is captured through a survey.

Ted Simons: So it's like a survey with kind of a local input into the survey. Correct?

Aruna Murthy: That's right. Bureau of Labor Statistics works with Arizona Department of Commerce in order to come up with the numbers. But as far as U6 numbers, we don't report that, we only have close to a U3. But the numbers -- that information is totally gathered using a survey.

Ted Simons: And that information it sounds like you could be up to 18 some-odd percent with the quote unquote marginally employed looking for work. That's pretty high.

Aruna Murthy: That's right. It's 18.5% as of 2009. That's roughly one in five people.

Ted Simons: Compare that to previous years.

Aruna Murthy: That's right. A lot of unemployed people, and a lot of discouraged people as well, that's what causes that number to go high. But even in previous years, you find roughly the same relationship between the U3 and U6. It hasn't changed a lot, but slightly more than what we have seen in the past. Mainly because of the times we are in right now.

Ted Simons: And the times we're in right now, we're at 9.6 with the U3 number, and we'll stick with that for the time being, because that's the one that everyone see and compares against with other states and around the country. When -- do the numbers show anything as far as that improving significantly in the near future?

Aruna Murthy: I don't want to speak to the unemployment rate itself because we don't project those numbers out. What I can speak to are the actual employment numbers. Where we see changes happening. And as well as the projected employment and occupation numbers in the future. Compared to the same time last year, we are way better than where we were last year. If you look at the year over year numbers, we have pretty much close to zero percent. We're at negative .3%. Once we have crossed the zero percent mark it's telling us we are doing better than -- gaining more jobs. Compared to other states, like Nevada, like California, unemployment rate is relatively lower, so we are in a better position compared to those states. Florida, their rate is much higher than Arizona's unemployment rate. Similarly if you look at Nevada, the rank in terms of year-to-year growth, they're 50th in the state according to the most recent number, whereas we are 36th among the 50 states. So yes once upon a time in the top positions, now we're 36. We have gone as low as being the 50th position also. So we are climbing up our ranks, and things are getting better in Arizona.

Ted Simons: As far as the jobs are concerned, what kind of jobs are we talking about here? If they're getting better, they're getting better for whom?

Aruna Murthy: Well, the jobs that we are expecting to be creating is in the health care area. In the short-term, it's not a great story. There are more -- short-term is between 2009-11, so we had already in 2010. It's again -- in the long-term, we do see most of the sectors are gaining jobs. Most of the jobs, if you look at -- it is a cashier and registered nurses, home health care, those types of professions. If you look at just the person's growth, that also comes down to a lot of health care jobs like medical practitioners, doctors, nurses, I think mainly if you look at profession by itself, would I think the health industry is going to see a lot of jobs in Arizona, mainly because we have a population changing. We have a lot of people who maybe is getting into 65 plus, we're having migration of old people also, we would have people are living longer, so the demand for the health care occupation assist going to be high, and we expect that to be in the next 10 years or so.

Ted Simons: All right. Very good. Thank you so much for joining us.

Aruna Murthy: Thank you very much.

Federal Tax Changes

  |   Video
  • A new report from the non-partisan Institute on Taxation and Economic Policy says federal tax changes have made itemized deductions more unfair to low-income taxpayers and more costly for government. Dana Naimark of the Children’s Action Alliance and Kevin McCarty of the Arizona Tax Research Association discuss the report.
  • Dana Naimark - Children's Action Alliance
  • Kevin McCarty - Arizona Tax Research Association
Category: Business/Economy

View Transcript
Ted Simons: A report released today says that federal tax changes have made itemized deductions more unfair to low-income taxpayers and more expensive to government. The report is by the institute on taxation and economic policy, a nonpartisan, nonprofit research organization that advocates reforms to itemization rules to increase revenue for governments. Here to talk about the report is Dana Naimark of the Children's Action Alliance, and Kevin McCarthy, of the Arizona Tax Research Association. Good to see you. Thanks for joining us. Dana, as regarding this report, what are we talking about here as far as deductions?

Dana Naimark: We're talking about money that we right off of our taxes when we pay or state income tax. I think all of us would be shocked if any politician stood up and said, I want to promote homeownership and I'm going to give out the biggest checks to the wealthiest people. In fact, when we do itemize deductions, that's what happens.

Ted Simons: Does it make sense for itemized deductions in these times of bad budget climates?

Kevin McCarthy: I think there's a fair degree of exaggeration going on with the study in terms of what itemized deductions are for and why they were put in the federal code. This study speaks specifically to its impact on state and local government. The truth is, itemized deductions were -- are carried over from schedule A from the federal return for simplicity purposes, and it was I'm sure the same in other states as it is in Arizona, was designed to make the payment of your taxes not as -- not overly complex. We all know it's difficult to file our income taxes, if you can imagine having significant differences between federal and local and state returns, it would just make matters worse.

Ted Simons: How do you see that?

Dana Naimark: There's a lot of ways to make it simple, but not have the itemized deductions the same way they are. In fact, in Utah, they do one of the models that the report suggests. So instead of using the same itemized deductions as do you in your federal return, they do a percentage of that as a credit. 1%age calculation that's very simple, it adds no complexity at all.

Ted Simons: Converting to credits, what do you think?

Kevin McCarthy: You could do that, but why stop there? What's lacking in the report for what you want is simplicity or transparency on top of it, and you want to try to make things fair for everybody involved, you get rid of all of the deductions and go to a flat tax. You have a flat rate that's been debated in some states and some states have moved in that direction, it's been debated in recent years at the capitol. That would be honesty, we're going to get rid of all of the nuances that people might gain, we're going to get rid of the deductions, tax federally adjusted gross income, everybody at 4%. That would be a real reform, and then if you wanted more money you raise all the rates to accomplish that. This is really just a mechanism to try to increase progressivity and state income tax codes by dramatically increasing taxes on upper income earners who are already paying most of the income taxes both at the federal and local level.

Ted Simons: Respond to that, please.

Dana Naimark: Arizona is in the top 10 list for the most regressive tax systems. Our state income tax is somewhat progressive, but the rest of our tax system is not. So the income tax has to kind of balance that out.

Ted Simons: So when critics will say this is basically a de facto tax increase, you would say --

Dana Naimark: Oh, if some of these reforms would be a tax increase. So I think the question is, we all heard all of the supporters for prop 100, the temporary sales tax increase say it's a temporary measure, overall our tax and budget system are broken and we need to look at long-term issues. These are long-term, systemic issues that should be on the table as we're examining overall tax reform.

Ted Simons: One of the ideas, one of the options mentioned in the report is to cap the total value of itemized deductions at a certain level. Make sense to you?

Kevin McCarthy: Well, we already are doing that at the federal level. You could do that if you're -- I'm glad Dana admitted this is just about increasing income taxes. If you want to increase income taxes, there's a multitude of ways that experts can lead to you do that. You increase rates, you get rid of deductions, the less transparent way to do it is to start attacking deductions as opposed to increasing rates on everybody. But, yeah, make no mistake, there's a lot of different ways to do it. The feds have done it with the alternative minimum tax, and there's a variety of ways in the federal return that are already capped those deductions. So that's been done. Those caps are carried forward on the state return.

Ted Simons: The idea of capping these deductions, why does that make sense?

Dana McCarthy: Well, again, because right now the benefits are so skewed to higher income households. And in Arizona, higher income households already pay a very low percentage of their income in taxes compared to middle income households in our state. So it's a way to balance that out. The feds have capped the deductions, but that cap is being phased out, which is one of the reasons this report came out now. That's one of the things that's been changing. Plus, other states around the country are looking at these kind of reforms as they look at tax reform.

Ted Simons: Is there a fairness issue here? From the report and from what Dana is saying, it sounds like the upper income, in general, the report is saying, not necessarily paying a fair share here.

Kevin McCarthy: Well, that's what makes this relatively absurd. They're using personal income taxes and making an argument for fairness, and progressivity and regressivity. That's where all the progressivity exists, in federal and state taxes, is with the personal income taxes. In Arizona, 13% of the filers pay 61% of the taxes. We all know who those 13% of the filers are. Those are the folks with 100,000 in income and above. They're already carrying the burden. It is -- it takes a fair degree of hutzpah to do an analysis to say those people are not paying their fair share. You can say we want to raise taxes on them further, which is what the objective is. But you can't do it under the banner of fairness.

Ted Simons: What do you say about that?

Dana Naimark: Well, Kevin's wrong. The income tax is the only aspect of the tax system that is progressive. But when you combine that with our huge emphasis on sales tax, low-income households pay more than twice the percent of their income as high income households in Arizona. So we do not have a fair tax system now. I think these are some really good options to look at to improve fairness, and some options that give us some tax reform when we desperately need it.

Ted Simons: Do you agree low-income taxpayers pay twice as much?

Kevin McCarthy: Well, what -- again, what Dana is conveniently leaving out and what the authors of this report left out is -- are federal income taxes. Anybody that does an honest analysis of progressivity versus regressivity starts at the federal level and goes right through state and local taxes. The progressivity and taxes in the United States are in incomes tackes. So if you include those, no analysis would show you that our taxes in the United States are regressive. Where there is regressivity in our system, Dana is correct, is at the local level in sales taxes and to a lesser extent with property taxes. You can't bifurcate state and local taxes from federal income taxes and make regressivity arguments. They do here, but they conveniently when they make the argument, forget about the federal income taxes that are paid.

Ted Simons: Is there a picking and choosing going on in this report regarding state and federal?

Dana Naimark: This is a report that focuses on what's under state control. And our state tax system is like a crazy house that's been remodeled room by room, or one ceiling lowered or raised, and one wall knocked out with no big picture design. No architectural plan. So I think we really need overall looking at our tax system and not just leaving things in place because they have been there before.

Ted Simons: I notice somewhere along the line in my research the never ending deduction was looked at. What is that?

Dana Naimark: Arizona is one of only six states where we allow people, everybody is allowed to do this, we allow people to double dip. So we get to deduct our state income taxes paid off of our federal income taxes, but then we get that same deduction again when we do our state income taxes again. Only six states have that, most states you add back when do you your state tax form, you add back what you've paid for state taxes.

Ted Simons: Is that a start in terms of reform?

Kevin McCarthy: If you want to raise taxes on the very people who are paying income taxes now, you -- again, there's a lot of different ways to do it. To view that as somehow that is a nuance that has just developed is -- defies all the history of state income taxes. That's merely -- the states that don't allow that pass-through probably did at one point, and in an effort to raise taxes, took away that pass-through on deductibility and mortgage interest.

Ted Simons: I've only got time for a yes or no -- itemize deduction, get rid of them, or raising taxes? Is there a better option?

Kevin McCarthy: If we're going to raise income taxes under the banner or reform, go to a flat tax and tell people how much you want and raise the rates across the board.

Ted Simons: Even quicker, flat tax on option?

Dana Naimark: Worst way to government absolutely not.

Ted Simons: Great stuff. Thanks for joining us.

Independent Voters

  |   Video
  • ASU pollster Dr. Bruce Merrill discusses the growing number of independent voters in Arizona and how they impact elections.
  • Bruce Merrill - ASU pollster
Category: Vote 2010

View Transcript
Ted Simons: And a number of independent voters in Arizona is growing, but independents don't vote as reliably as those registered to political parties. Here to talk about that and other aspects of today's primary vote is Arizona state University pollster Dr. Bruce Merle. Always a pleasure.

Bruce Merle: Good to see you.

Ted Simons: Before we get to the vagaries of today's vote, let's talk about independents and the growing number of independents in Arizona. Why?

Bruce Merle: Well, I think first of all, people are really turned off by politics. If you look around the country, the states where you have these tremendous amounts of money being spent and negative campaigning, every one of those states is experiencing huge increases in independents in very low voter turnout. So I think a lot of people are just sick and tired of what's going on in politics.

Ted Simons: Are most of those sick and tired democrats, or Republicans?

Bruce Merle: Well, they're both. I mean, in more than that, what concerns me is -- if you look at the last registration figures, 35,000 roughly since may, 25,000 of those are independents. 10,000 are Republicans. The democrats lost 500. This tremendous increase in independents unfortunately many of those people are people that have left either the Republican or Democratic party, they're more moderate and it leaves the party with the more ideal logically pure voters, which I think is one reason we have so much conflict.

Ted Simons: Interesting. And talk about other aspects of this. Other impacts on the parties and the Arizona political climate. Because as you mentioned, these are folks who are disaffected with politics in general, these are folks if you're disaffected enough, you're not going to vote, are you?

Bruce Merle: That's what happens. One of the misconceptions about independents, we say they are so important in the state, and they are, except their turnout rate is very, very low. In fact, not much higher than the Hispanic turnout, which is traditionally very low.

Ted Simons: OK, so we've got affected Republicans and democrats, and they don't -- they're wandering the wilderness here, and not necessarily vote can as much as they should. Is there ever a chance that they could all get together and say, let's form a party?

Bruce Merle: You would be shocked how many calls I get in an average week people saying, can we start a new party? Historically you're right on. What has happened with party realignment since the history of this country is once every long generation, about 40 to 50 years, the number of independents builds up, and then it's like a dam breaking. They traditionally go in one direction. The last time we had that was about 1968, '64, with the Goldwater revolution. It's about time. That could happen. And I think frankly some people thought maybe Obama could bring that about, but he hasn't.

Ted Simons: So in general, it's often a passing fad, and the sustainability is not too strong.

Bruce Merle: Well, it's more what happens. You have this large group of disaffected people, and then some really charismatic candidate or some major thing happens. A depression in 1932. Completely restructures the political environment.

Ted Simons: But you mentioned Obama, and you also mentioned the fact that with these moderates all leaving and the two sides growing farther apart, and a charismatic figure comes and the moderates go, let's go over here, or let's go over there, shouldn't that buy its -- by its nature tell the other party that's being left out, hey, we've got to calm some of the folks down, we're losing out to those other guys?

Bruce Merle: Absolutely. If you look at the rise of George Wallace, the American independent party in the '60s, he got 23% of the vote. What was the impact of that? It caused the Republican party to become much more conservative during that election cycle. So the main impact of these independent third party movements is really to move one or the other parties in that direction.

Ted Simons: You mentioned other states are seeing an increase in independent voters as well. Are we very much different than others? Are we pretty much in line with others?

Bruce Merle: Pretty much the same. The trend across the nation is the same. What one of the things, Ted, that does concern me, we feel it about 60-65% of the young people coming into the political system for the first time are rejecting both political parties and becoming independents. So when you have a whole generation of young people that are so turned off, that's going to have consequences down the road.

Ted Simons: Morrison institute had a survey about primaries in Arizona, and the idea of maybe an open primary finding 85% of folks thinking it's a good idea here in Arizona, 75% like the idea in the primary, the top two vote getters then go head-to-head and everybody else has to go home.

Bruce Merle: My feeling is it simply shows California is doing exactly that, so we're going to have the advantage of seeing what happens in California. I think there's going to be more and more of these proposals because people understand that about 80% of all electoral outcomes in America occur in the primary. The primary system, if you look at what's happening in Arizona, after this primary, we will probably have maybe three or four of the 30 legislative districts that are even competitive. So the races are pretty much over in many cases by the time the primary. So we are going to have to reform the primary system. This will be a good time to do it because we're going to have to have reapportionment and redistricting because of the 2010 census.

Ted Simons: And I'm sure some independents are that are watching right now will be saying, I went to the polling place today, I was told I got to go democrat or Republican, I can't pick and choose. Should they be able to pick and choose?

Bruce Merle: Well, every state is in charge of their own electoral laws as it relates to these kinds of races. That's just the system here. But I think that the point is we really do need to look at the primary system for future elections in Arizona.

Ted Simons: The -- before we let you go, the polls are closed now as we're airing, and we've had everything from tremendous heat, to thunderstorms rolling through the valley, all sorts of things. How does that play? Does that keep -- is that even do more to keep the moderates away from polling places?

Bruce Merle: Not really. The reason why is early voting. We've been voting for 30 days, and what our research shows us, about half the people vote the first 10 days that they get those ballots. And so in this particular case, having a thunderstorm come late isn't going to affect it much. I mean, it's disappointing that some people that want to vote won't be able to. But no, it makes my point. We expect only like a 22% turnout, Ted, and only -- 70% of the people, to put it the other way, 30% of the people that are eligible to register don't even register. You get a 50% turnout, I mean, you're getting in some cases like in the third district where you're going to have 10 candidates, somebody could elect to the U.S. Congress with 15,000 votes. And make policy for everybody living in that district, about 300,000 people there.

Ted Simons: Fascinating stuff. We'll see what happens as far as today's vote is concerned. One thing is for sure, independents will be a factor, just maybe not as much as they should be.

Bruce Merle: Absolutely.

Ted Simons: Good to see you again.

Bruce Merle: Good to see you, Ted.