Suppose there was be an initiative on the ballot in Arizona in this November election to do two things: state personal income tax should be eliminated in Arizona and state legislature cannot raise additional taxes to replace the lost revenue without voter approval.

Suppose your neighbor, who knows very little about state and local finance and budget, is deciding whether to vote yes or no on this initiative. He loves the idea of not paying state income tax, but on the other hand, he thinks that it seems too good to be true. He comes to you because he knows that you are currently taking a course on government finance, and asks you to explain to him what this all means.

Please explain to your neighbor, in as detailed a way as you can, what this initiative means for Arizona. You need to make some educated guess about what the consequences will be and how the state and local governments might react if personal income tax is actually eliminated. You need to address at least the following four main points:

1. What this means to the state tax revenue system, both the impact on the overall size and more importantly the vertical equity issue of the tax system as a whole;
2. What this means to the programs provided by the Arizona state government with regard to each programs funding structure (you need to address specifically all the programs listed above and cite budget figures to support your argument);
3. How this might affect local government finance in Arizona (be specific) and how they will respond; and
4. How this will affect Arizona citizens, from both the revenue and program perspectives.