As I pointed out this week in "You Screwed Up: How Voters Have Broken Arizona's Government," the Legislature needs a two-thirds majority to pass a tax increase. Since that threshold is politically impossible to reach, Arizona's tax system hasn't changed much in the last few decades (unless you count virtually eliminating the property tax and cutting income taxes, which primarily benefit Arizona's wealthiest residents).

So how do the Democrats manage to create new taxes on a wide range of services—from haircuts to legal representation—without triggering the two-thirds requirement? They cut the overall sales tax all the way down to 3.4 percent, making the entire package "revenue-neutral." Since it doesn't increase revenue to the state, it doesn't trigger a constitutional challenge.

OK, say the Dems are right and this is viable. Since it's revenue neutral, then how do they get any more money to patch a $3 billion deficit? Here's where the financial magic comes into play: Cities, counties and other taxing districts can now extend their sales tax to cover services, too. And they're not obligated to reduce the rate to keep it revenue neutral.

Legislative Democrats have released their new budget plan to fix the state’s $3 billion (give or take) shortfall. It’s an audacious stab at tax reform that uses all sorts of abracadabra to dramatically change Arizona’s tax structure on a simple majority vote.

You can find all the details at strongerarizona.com, but here are my key takeaways:

• The Democrats extend sales taxes across services that are currently untaxed. That means a lot of people—lawyers, accountants, barbers, dog groomers—are suddenly going to be paying taxes.

• To keep the increase “revenue-neutral” in an effort to avoid the requirement that any new tax be approved by two-thirds of the Legislature, the Democrats lower the overall sales tax from 5 percent to 3.4 percent.

• Here’s where the gimmicks really start: The plan anticipates that cities and counties will also extend the sales tax to services, creating a windfall for them. As a result, the state can then borrow $1.17 billion in shared revenues from cities and counties. (We’ll explain that in more detail in an upcoming post.)

• Property taxes will be increasing. The Democratic plan restores a statewide property tax that will raise

My nomination for worst media deal of all time: Time Warner buys AOL for $124 billion in 2000. Wasn't the tech bubble a fun time?

From Bloomberg today:

Time Warner Inc. will spin off the entire AOL Internet unit by the end of the year, reversing a failed $124 billion merger that triggered record losses.

AOL’s online advertising and Internet-access businesses will be separated into an independent, publicly traded company, New York-based Time Warner said today in a statement.

And:

Time Warner’s 95 percent stake in AOL is worth about $6.3 billion, including about $3.4 billion for the advertising business and $2.8 billion for the access division, David Joyce, an analyst with Miller Tabak & Co., estimated in a report yesterday.

When Google bought a 5 percent stake in AOL for $1 billion in 2005, it valued the unit at about $20 billion. Time Warner said last month it was in talks to buy back the stake. Google wrote down $726 million of the investment last year.

A new batch of Mars photos taken by the UA Lunar and Planetary Lab's HiRISE camera aboard the Mars Reconnaissance Orbiter is available online. The upper shot is titled simply "Spider Evolution," while the lower shot features sandy Martian dunes that have been swept by dust devils.

NAU student Addie Hite explains:

This image is located in a crater in the Hellespontus region that displays dunes and dust devil tracks.

The larger barchan-like dunes are surrounded by

The Democratic House and Senate caucuses are teaming up tomorrow to unveil a new state budget proposal. Rep. Steve Farley told readers of his Farley Report that he couldn't "reveal any details right now—except to say that we can save education, healthcare, and jobs while at the same time enacting real tax reform that makes our state much more strong and stable for the coming decades."

Farley also said the budget would only need a simple majority to pass the House and Senate.

While Farley isn't sharing details, we hear that it starts with an expansion of the sales tax to cover services and other exempted items. Then it lowers the overall sales tax, and then the financial hocus-pocus really starts...

Details to follow...

A few days ago, New York Times columnist Paul Krugman made some of the same points about California that I make in this week's cover story, "You Screwed Up: How Voters Have Wrecked Arizona's Government." Krugman's take:

The seeds of California’s current crisis were planted more than 30 years ago, when voters overwhelmingly passed Proposition 13, a ballot measure that placed the state’s budget in a straitjacket. Property tax rates were capped, and homeowners were shielded from increases in their tax assessments even as the value of their homes rose.

The result was a tax system that is both inequitable and unstable. It’s inequitable because older homeowners often pay far less property tax than their younger neighbors. It’s unstable because limits on property taxation have forced California to rely more heavily than other states on income taxes, which fall steeply during recessions.

Even more important, however, Proposition 13 made it extremely hard to raise taxes, even in emergencies: no state tax rate may be increased without a two-thirds majority in both houses of the State Legislature. And this provision has interacted disastrously with state political trends.

At least we haven't frozen property values, although not for lack of trying on the part of many anti-tax reactionaries.

The Arts Marketplace is a new artist-run group, started by Therese Perreault of Community Storytelling Arts, to focus on "the artist as entrepreneur," through peer and business support for artists and creative entrepreneurs.

The Arts Marketplace Summer Twilight Series kicks off Thursday, May 28, from 6 to 8:30 p.m., at Community Storytelling Arts, 40 W. Broadway Blvd. It's the first of three events to help start this new project.

Drawing from existing resources and the experience of successful local artists, Arts Marketplace provides peer support and business discipline for artists and creative entrepreneurs. In this time of dwindling government and corporate support, artists and arts organizations must focus more on individual contributions and earned income. Arts Marketplace will help guide you to solutions for success. They’ll be holding a series of three events, each of which will include an open house of the Arts Marketplace workshop and meeting space and gallery space, gallery show, artisan work, entertainment and refreshments. Guests will have chances to win prizes donated by local artists and businesses. For more information on how to become a member, network with other artists, learn with local businesspeople, and show (and sell!) work in Arts Marketplace events, contact Therese Perreault at [email protected] or 882-3988. Visit www.artsmarketplace.org for a complete list of offerings.

The next open house is Thursday, July 23, at 6 p.m. and the last is Thursday, Aug. 20, at 6 p.m. Arts Marketplace is located in the historic CO Brown house with Community Storytelling Arts: A Multicultural Arts Studio; El Centro Cultural de las Americas, Borderlands Theater Company, and Cultural Connections, 40 W. Broadway Blvd.; between Church and Stone, downtown Tucson.

The great folks of the Empire Fagin Coalition and Save the Scenic Santa Ritas have organized a day of activities on Monday, June 1, to focus public attention on the important role the Davidson Canyon/Las Cienegas watershed plays in our ecology. It's called Water Day 2009.

This fragile and indispensable network of streams, riparian zones, and canyons runs from the Rosemont area in the Santa Rita Mountains, through Davidson Canyon, and into Las Cienegas Preserve, eventually recharging the city of Tucson’s water supply.

With the proposed Rosemont Copper Mine (in the Santa Rita foothills) and the proposed limestone quarries on State Land spanning both sides of Davidson Canyon, this critical watershed is facing great peril. Water Day 2009 organizers ask all citizens to take immediate action to protect this watershed.

9:00 to 11:00 am
Free Water and Information to Travelers on Highway 83
Toxin-Free Water compliments of The Empire-Fagan Coalition and Save the Scenic Santa Ritas

While up in the Flagstaff over the holiday weekend, I stopped by the Museum of Northern Arizona to finally see "Therizinosaur: Mystery of the Sickle-Claw Dinosaur." A few years back, fossil hunters in southern Utah stumbled across a nearly complete skeleton of a 13-foot-tall clawed and feathered dinosaur that lived 93 million years ago. This particular Therizinosaur, which shows evidence of evolution toward today's birds, somehow ended up miles out at sea before it sank beneath the Cretaceous Western Interior Seaway that then split North America. It looks like it was a mean prehistoric ostrich with long, razor-sharp claws.

The exhibit, which includes a model of the therizinosaur's skeleton, a collection of his actual bones and artistic interpretations of what the fearsome creature looked like, continues through Aug. 30. Here's more info.

The museum will have Hopi and Navajo festivals later this summer.

Therizinosaur illustration by Victor Leshyk.

Our condolences to Arizona Treasurer Dean Martin, whose wife Kerry Martin, 34, died due to complications from childbirth last night. His newborn son, Austin, is fighting for his life.