Arizona voters approve 1-cent sales tax increase

PHOENIX, Arizona (Reuters) - Arizona voters on Tuesday overwhelmingly approved a temporary 1-cent sales tax increase to help cure deep budget woes in the southwestern U.S. state.

Unofficial results showed about 64 percent of registered voters approved the tax that will pump about $918 million into depleted state coffers in its first year when it goes into effect June 1.

The sales tax, which will increase to 6.6 cents on the dollar, is projected to raise $968 million in its second year and $1.06 billion the following year. It is set to expire May 31, 2013.

"Doing the right thing almost always means doing the hard thing," Arizona Republican Governor Jan Brewer told Reuters late Tuesday. "We all know that in life. Tonight voters spoke out about what needed to be done and I'm glad they did."

Brewer said the temporary sales tax is not the cure-all for financially ailing Arizona, one of the hardest hit by the housing crisis and recession.

But the governor said the additional revenue will help bridge the gap until better economic times return to the once fast-growing desert state.

We will move forward and continue to streamline government and make sure we do the best job with the dollars we have," she said. "I believe this is the beginning of Arizona's comeback."

Two-thirds of the money from Proposition 100 will go to primary and secondary education, with the remaining share allocated for public safety and health and human services. Those areas were targeted with additional cuts had the measure been defeated at the polls.

The state Legislature already had cut into what is now a $8.5 billion budget, eliminating such programs as all-day kindergarten and health care for some poorer Arizonans.

Brewer had sought a sales tax increase since early last year, but it was not until this February that state lawmakers agreed to put it on the ballot to let voters decide.

Opponents charged that the budget cuts were insufficient and said the sales tax burdened individual taxpayers and small business owners. They warned Tuesday about additional taxes in the future.

"Arizona citizens and small businesses have been assured that Arizona's grand canyon of a deficit won't be balanced through expanding the sales tax to services and higher property and income taxes," said Farrell Quinlan, Arizona director of the National Federation of Independent Business, in a statement.

"Voters will be justified in feeling betrayed if these commitments are broken."

The sales tax comes at a time when Arizona is facing economic boycotts from across the country in response to a controversial immigration measure signed into law by Brewer last month.

It mandates that state and local police check the immigration status of anyone they reasonably suspect is in the country illegally. Critics charge that the law is unconstitutional and represents a mandate for racial profiling.

The measure has cost the tourism-driven state millions of dollars in canceled convention business and prompted several cities nationwide to ban doing business with Arizona.

(Editing by Theodore d'Afflisio)