Arizona lawmakers approve corporate tax-cut package - East Valley Tribune: Politics

Arizona lawmakers approve corporate tax-cut package

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Posted: Wednesday, February 16, 2011 6:50 pm | Updated: 12:06 am, Sun Mar 6, 2011.

With not a single Democrat in support, state lawmakers gave final approval Wednesday to a $538 million package of tax cuts proponents say will stimulate the economy.

The votes in the House and Senate came after extensive debate about whether there's proof that anything in the package will actually create a single job in the state. Even House Speaker Kirk Adams, R-Mesa, conceded there is no guarantee.

"But this much we know: By reducing taxes on business employers, on entrepreneurs, by getting competitive again, Arizona will finally, thankfully, be in the game,'' he said.

The package, which Gov. Jan Brewer is expected to sign Thursday also drew some Republican opposition. But the reasons were different.

Rep. Eddie Farnsworth, R-Gilbert, expressed concern about some of the provisions in the bill creating a new quasi-public Arizona Commerce Authority to replace the state Department of Commerce. He said this organization will have broad authority to provide "corporate welfare'' in the form of grants to companies to convince them to move here.

That refers specifically to a $25 million "deal closing fund'' which would be at the agency's disposal.

And Sen. Ron Gould, R-Lake Havasu City, objected to the entire process of rushing the measure through, from introduction on Monday to final approval Wednesday. Gould also said it was made clear by legislative leaders that GOP lawmakers were not permitted to try to amend the 214-page package to alter provisions they did not like.

The big-dollar item in the package is a nearly 30 percent reduction in corporate income taxes, phased in by 2018, that will cut the state rate to 4.9 percent. That is designed to give Arizona among the lowest rates in the nation among states that impose a corporate levy.

It also will let multi-state firms that sell most or all of their goods outside of Arizona use a tax-computation formula which would let them escape paying any state corporate income taxes at all.

Another section is designed to reduce business property taxes by 10 percent.

That comes with companion language to increase the amount of local school taxes on homeowners that are paid by the state. That is designed to ensure that the burden is not shifted from businesses to homeowners.

But that change, when it finally takes effect later this year, will require homeowners to watch for -- and mail back to county assessors -- a postcard swearing that they do, in fact, occupy the property. That is designed to crack down on cheaters who take advantage of current law which presumes that all homes are owner-occupied, leaving it up to county officials to find the rentals which do not qualify for the rebate of 40 percent of school taxes owed.

Adams said that $538 million price tag, an estimate by legislative budget staffers, is just a guess. He said it not only seeks to predict the economy in 2018 but also does not account for what he believes will be more business activity -- and, therefore more revenues -- that the change in tax policy will create.

Rep. Bruce Wheeler, D-Tucson, said he is "not convinced'' that a single new job will be created.

"The only certainty is that education will be cut,'' he said. And Wheeler said Arizona already is short-changing education, saying the state spends about $7,000 a year per student while it costs about $40,000 a year to keep someone in prison.

But Rep. Chester Crandell, R-Apache Junction, said there is no evidence that money given to schools actually improves outcomes. He said what's needed is education reform.

"But you can't enact solutions without money to back it up,'' responded House Minority Leader Chad Campbell, D-Phoenix.

Rep. Tom Chabin, D-Flagstaff, predicted even broader impacts.

"Tuition will be higher at our universities,'' he said. "Tuition will be higher at our community colleges. There will be fewer officers in the Department of Public Safety. There will be larger classrooms in our public schools and people, vulnerable people, will remain ill and some will die.''

But Rep. Steve Vogt, R-Tucson, said the state needs to do something to deal with the loss of close to 300,000 jobs since the end of 2007.

"For the last three years, we've been really, really hoping that the Arizona economy will turn around,'' he said.

"We live in a competitive world,'' Vogt continued. "And companies have shown that not only are they not afraid to pick up and leave a state but they will pick up and leave a country.''

Some of the Republicans who ended up voting for the bill did so despite some misgivings. Rep. Cecil Ash, R-Mesa, said he was disappointed that his colleagues have so far refused to look at reforming the sentencing laws to ensure that the state is spending money locking up only those who really belong behind bars.

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