Tuesday, February 15, 2011

Fiscal Fast Track: GOP Lawmakers Rush Tax-Cut Plan

Posted By on Tue, Feb 15, 2011 at 11:34 AM

GOP lawmakers dropped a tax-cut plan yesterday that they hoped to get through the Legislature by tomorrow.

What’s the rush? Well, maybe they just didn’t want a lot of testimony complaining that the legislation will cost the state $38 million next year and will grow to $538 million when fully implemented in 2018, according to a JLBC analysis.

Defenders of the package maintain that it will spur so much economic activity that the new tax revenue will more than make up for the reductions in taxes—which is more an article of faith than of actual economic analysis.

The broad outline: The package includes a cut in the corporate tax rate from just under 7 percent to just under 5 percent. It eliminates some taxes for multistate corporations. It cuts business property taxes, which means an increase for homeowners unless that state provides a backfill—and the state doesn’t really have the money to do that without cutting elsewhere. It reduces the property tax on equipment that businesses own. And it includes a variety of incentives and credits, along with a closing fund that can be doled out at the discretion of the new Arizona Commerce Authority.

It’s all set to be phased in over the next four years.

You can find the details in this JLBC analysis.

When we talked to Sen. Frank Antenori a few days before the bill was released, he told us he was happy with the bill.

“It’s a pretty good jobs bill,” Antenori said. “Is it everything I wanted? No. Is it everything everybody in the Legislature wanted? No. Is it everything the governor wanted? No. But it gets the ball rolling in the right direction.”

But state Rep. Steve Farley, a Tucson Democrat, said it was ridiculous to drop a 214-page bill on lawmakers the night before it was supposed to be heard in the House Ways and Means Committee.

Farley was still analyzing the bill when he spoke to The Range on last night, but he said it didn’t make sense for the lawmakers to be committing future legislators to hundreds of millions of dollars in tax cuts at the same time that lawmakers are already planning on slashing the budget for health care, the universities and everything else government does—especially since the cuts will be

kicking in at the same time that the state will losing close to a billion dollars a year in tax revenue when the recently approved sales tax goes away.

Farley questioned why the bill was being rushed through a special.

“If there’s an emergency special session, it should focused on solving our budget crisis, not making it worse,” Farley said. “I don’t understand how tax cuts four years in the future are going to create jobs now,”

But Vic Williams, a Republican who represents the Catalina Foothills and Oro Valley area, said that the cuts send a message to businesses.

“Corporations from the bio-life science people to construction companies tell us they want certainty,” Williams said. “They don’t care if it’s three years down the road. They want something so they can plan for, long-term.”

Farley said that businesses have a need for certainty about government services: “They’d also like to know that we’re going to have roads and schools.”
Farley suspects that some GOP lawmakers would be happy to see more budget shortfalls in the future.

“If they blow another hole in the budget, it means they get to cut more things,” he said.

Rep. Matt Heinz, a Tucson Democrat, who said there are elements of the bill he could support (such as a reduction in business personal property taxes), criticized the price tag of the entire package.

“I support an effort to stimulate job generation, but not at the expense of education,” Heinz said. “We have to show business that we have an education system that produces skilled workers.”

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