State Capitol News
11:21 am
Tue January 26, 2010

Vote on tax breaks could cure state's economic woes

Phoenix, AZ – The proposal by House Speaker Kirk Adams is based on the
philosophy that at least part of the reason Arizona's economy has
been hit so hard is that it lacks diversity. Much of what has
driven the state has been growth -- people moving here -- which
fueled the construction industry. And when the real estate bubble
burst, so did that base. Adams said the elements of the bill are
based on an economic study he commissioned.

(The conclusion of the report, essentially, would be that to get
in the game, for Arizona to get in the game of attracting
businesses and attracting base industries to our state and
retaining those that we have, we have to have a competitive,
broad-based business tax structure. We do not have that right
now.)

He said that means lower taxes. The plan would cut the corporate
income tax rate, now slightly below 7 percent, to just 4 1/2
percent. Individual income tax rates, which are computed on a
sliding scale, would drop 10 percent. Adams said this drop is
necessary because most of the small businesses are set up so they
pay no income taxes, with the earnings passed on to the owners
who declare it on their personal taxes. It also would eliminate
the state property tax. And it would reduce the basis on which
businesses are assessed for local tax purposes. That last measure
in particular drew fire from Rep. Andy Chabin. He pointed out
that the way local property taxes are levied, a reduction in what
businesses pay means an increase for homeowners. And he said all
businesses will benefit from this shift, not just the ones that
pay the high wages Adams said he hopes to lure to Arizona.

(This is a design to benefit corporations. But it is at the
expense of homeowners. You implement this tax ratio shift,
there's no doubt homeonwers' taxes are going up. Pinnacle West's
taxes are going down. And so are strip club owners.)

But Rep. Rick Murphy said reducing taxes on business makes sense,
even if some of the burden falls on homeowners. He called it a
long-standing problem that taxes on businesses are
disproportionately higher than residents. He said that's great
for individuals and folks that retire here.

(But as long as we continue to think we can stick it to
corporations and that's it's free money and it falls from the sky
and there's no consequence to everyday people when we do that,
we're going to keep getting what we've got, and that is no good
job creation.)

The plan got panned by Democratic Rep. Steve Farley. He said
companies won't move here as long as Arizona keeps cutting the
funds for public schools and higher education. Adams said that
economic report he commissioned does state that an educated and
trained workforce is important.

(But it will also state that those things don't matter as much if
you can't even get the attention of those corporate relocation
specialists, those people who are looking throughout the states,
across the country, of where they're going to land their
companies.)

Adams noted the plan also has special programs to provide job
training dollars and tax rebates to firms that locate or expand
in the state. All of that, he said, will stimulate the economy.
Farley was unconvinced.

(Money talks, Arizona students walk, in that case. We can only
get businesses to come here if we bribe them to come here, in
effect.)

Adams said the tax breaks and incentives are not bribery. He also
said he is cognizant of the state's current finances, including a
$1.4 billion gap that remains this fiscal year between revenues
and expenses and an anticipated $3.2 billion deficit next year.
Adams said that's why his plan, if approved, does not start
reducing taxes until 2011, with full implementation four years
later. For Arizona Public Radio this is Howard Fischer.