Gov. Jan Brewer said Tuesday she may finally give the state’s tax-cutting knife a rest.
In Germany to promote Arizona both for business expansion and tourism, the governor said that she has been using the opportunity to tell the story of the state’s economic recovery. Brewer also said she is detailing for business executives the package of tax cuts enacted in the past two years.
“They were absolutely impressed with what we have done,” the governor told reporters in a conference call. “And they thought that we were very, very competitive with everything we’ve done in regards to our tax reform, our incentives.”
During those last two years, Brewer signed bills to cut taxes on capital gains, provide tax breaks for new investments and eventually slash the corporate income tax rate by 30 percent. The price tag of the combined efforts, when fully implemented, is estimated to exceed $630 million.
All that, the governor said, may be enough for awhile.
“Maybe there is a possibility if the economy turns around so great that we could do more in that direction,” she said.
“I would never say ‘never,’” the governor said of future tax cuts. “As I sit here today, it would be almost impossible for me to make that kind of prediction.”
But Glenn Hamer, president of the Arizona Chamber of Commerce and Industry, said he shares the governor’s assessment of the state’s current competitiveness — and of the need for future massive tax cuts.
“By having a phase-down of our corporate income tax rate, by making the state incredibly attractive for export-oriented industries of all types, we have hit the theoretical limit on some of the corporate income tax reductions,” he said.
In that conference call, Brewer said she extended an invitation, at least indirectly, for German Chancellor Angela Merkel to visit Arizona in September, tacking that on to her NATO meeting that month.
And she got to stop at a remaining segment of the Berlin Wall.
“I put the date and signed my name and then put down the word ‘Freedom,’” she said. “That was amazing.”
But the governor said the main focus of the trip to Germany — and, Wednesday to France — remains promoting the state.
Brewer said Tuesday morning featured a trade and tourism seminar.
“We met with about 25 to 30 representatives who expressed keen interest in Arizona,” she said. And Brewer said German executives have a particular interest in solar energy.
“We came with the idea on this trade mission to talk about global competitiveness to ensure that Arizona is being recognized for everything that we’ve accomplished,” she said.
Hamer said that cannot be underestimated.
“We’ve made gigantic strides over the last two years,” he said.
How good? Hamer noted that, even with those tax cuts yet to be phased in, the state earlier this month managed to crack the Top 10 list of the best places to do business in a survey of corporate chief executive officers by ChiefExecutive.net.
“My joke is, in each of the last two years we’ve passed a once-in-a-generation tax reform,” Hamer continued. “You obviously can’t do that every year.”
Hamer said that, as far as he can tell, Arizona now has a tax system which, in general, is competitive with other states. He said, though, that can be a moving target as other states continue to revamp their own tax structures.
But Sen. Steve Yarbrough, R-Chandler, said he still sees places where the state can do more. One is the issue of property taxes on business equipment.
Current law exempts the first $67,000 of equipment from taxes. One provision in this year’s tax cut package will increase that to more than $120,000.
Yarbrough, who chairs the Senate Finance Committee, said that’s still too high.
“That really is kind of a killer tax,” he said.
The problem, however, may resolve itself: Lawmakers have put a measure on the November ballot to set up a formula linking the exemption to median earnings in the state. Farrell Quinlan, state director of the National Federation of Independent Business, said that, at current levels, that computes out to about $2.4 million.
Yarbrough also believes that, even with the 30 percent cut in corporate income taxes, the rate is “still relatively high.” And he said the tax code always will need some “tweaks around the edges.”
Hamer said what’s needed now to make Arizona more attractive to business, is a greater focus on higher education, with companies believing a university system that “churns out world-class graduates” is as important as tax and regulatory policy.
“We’ve got an issue with the skills that our university graduates and high school graduates have,” Hamer said. “Not all have the skills they need to succeed in the 21st century workforce.”
He also made a pitch for construction of the proposed I-11 to connect Phoenix with Las Vegas.