Arizona Legislature: Tax Cuts R Us

Arizona House

Taking our first votes of the 53rd Legislature

This week in the Arizona Legislature is crossover week, which means bills passed by one house will be heard by the other. The House began hearing Senate bills on Monday and vice versa. In advance of crossover week come two weeks of cramming as many bills into the pipeline as possible.

Last week the House passed the 200-bills-passed threshold and had two late nights– 7 p.m. on Tuesday and 11:30 p.m. on Thursday (the deadline to hear House bills). If you want to hear some late-night speechifying, check out the debate on the Citizens Initiative— which the Republicans and the Chamber of Commerce want to kill and the Democrats defended. (When you go to the video, the agenda of the debate appears below, so you can scroll in to the sections you want to view.)

There have definitely been some themes so far in this session. Besides the push for fingerprinting citizens, the jabs at environmental protection, and the elimination of oversight and transparency by cutting all citizen review boards, the big theme has been giving away tax revenue (AKA, tax cuts, tax credits, tax subtraction, tuition waivers, economic development or trickle down economics).

Ironically, on many of these giveaway bills fiscally conservative Republicans (who don’t like spending money) and the fiscally conservative Progressives (who don’t want to give away tax revenue as long as the schools are underfunded) voted together. In the past two weeks, there have been maybe as many as 10 bills where some combination of Progressives and Conservatives voted against spending money that we don’t have.

Although most of these tax cuts (tax subtractions or tax credits) have passed the House, they can still be stopped when they are heard in the Senate and vice versa. (Bad bills that passed in the Senate, like vouchers for all, can be stopped in the House in the coming weeks.)

Tax Cuts R Us

Greenhouse giveaway, HB2325, was brought forward by a grower in Santa Cruz County who lost a battle in tax court and came to the Arizona Legislature for a fix. This foreign-owned corporation wants their 100,000 square-foot “movable” greenhouses to be classified as personal property (which depreciates over time and would eliminate all of this corporation’s tax burden in the future). Currently, the structures are classified as real property, which appreciates over time as the business grows. This tax giveaway was defeated by a bipartisan urban/rural coalition of fiscal conservatives, including all of the Progressives. I voted against it because although this bill was designed to help one grower, if passed, it could help multiple greenhouse growers– to the extreme detriment to schools, particularly rural schools. Schools need the money; corporations should pay their fair share. (Although this bill was defeated, and hopefully is dead. Watch out for a Zombie revival bill. Here is the video.)

Corporate Welfare for the Big Boys (HB2492) is a complicated, multi-layered bill with several financial benefits including tax credit conversion and sales tax forgiveness for Arizona’s largest and most successful businesses— Raytheon, Honeywell, Boeing, and Intel. This bill was designed to help employers with 2000 or more employees with research and development and construction. As I said on the House floor when I spoke against this bill, it does nothing for local small businesses or entrepreneurs (like the researchers at the UA Tech Park)– unless at some point in the future Trickledown Economics actually works. (We have many scientists in Southern Arizona. Why would we help only military research? We should foster research in many areas — from the development of new drugs to the development of high-heat/low-water crops– by giving out seed grants to scientists. Seed grants help scientists conduct preliminary research and get larger federal grants. That’s sustainable economic development.) Also– at a time when the City of Tucson is facing multiple sales tax increases, why would we forgive sales tax paid by major employers, while requiring citizens to pay more? In a surprising 32-23 defeat, a bipartisan group of fiscally conservative Republicans (who don’t like to spend money) and Democrats (who want schools funded first) stopped this bill on Thursday. (Again, watch for a Zombie revival. Here is the video.)

UPDATE: The HB2492 House floor debate and vote was covered by several media outlets. (My comment about sales tax and diapers was even picked up by the Miami Herald.)

Arizona Republic Version: How a tax-cut bill met its demise at the Arizona Legislature (which has a cute video attached)

Miami Herald version: House rejects new way for big firms to use tax credits

KJZZ version: House rejects new way for big firms to use tax credits

KTAR version: Arizona House rejects new way for big companies like Intel to use tax credits

Airline giveaway, HB2533, like the greenhouse giveaway, was brought forward to help one corporation. The airline company who would benefit from this bill is not headquartered in Arizona currently. Apparently, Arizona already gives some sort of tax credit to airlines; with this bill the sales tax break is extended to airlines whose planes are jointly owned. Silly me, when I first read this bill, I thought of my friend who owns a small plane; due to community property, he and his wife jointly own his plane. I didn’t realize initially that this bill was designed for one corporation that has 700+ planes. This could cost the state hundreds of thousands of dollars in future revenue. The fiscal note– which is supposed to estimate the cost or benefit of a bill– was really confusing. I asked the sponsor to explain the fiscal impact to the general fund of excusing these taxes. The answer is: no one knows. This bill was on its way to defeat until the Republicans did some arm-twisting and passed it by a narrow margin, 32-28. (Here is the video.)

GPLET reform (HB2213) was a hot potato– with Republicans, Democrats, and lobbyists for the cities and developers tossing it around for weeks before we voted last week. The GPLET is a tax abatement mechanism that has been around for years. This year’s bill represents the second time the Legislature has tried to reform the GPLET and make the tax giveaways less lucrative for the recipients and less stressful on the general fund. The GPLET is a tax swap plan that allows developers to forego paying property taxes while they are building upon and developing a plot of land in an area designated as GPLET-eligible. (In Tucson, these tax giveaway deals have occurred primarily downtown. Tempe and Phoenix also have extensively used the GPLET to develop Mill Ave and downtown Phoenix.) The original GPLET allowed property tax abatement forever into the future. The current GPLET gives away future property taxes for 25 years into the future. The reformed GPLET (HB2213) caps the property tax giveaways at eight years. What’s wrong with giving away so much property tax? Public schools are funded through property taxes. In their current form, GPLETs allow corporations to not fund schools or anything else paid for by property taxes. In its original form, HB2213 would have stopped local governments from excusing property taxes meant for schools, but that was eliminated from the final bill, along with the definition of “blight”. (GPLETs are supposed to help a city eliminate blight.) So– why is local government letting corporations off the hook for funding schools? Lobbyists tell me that the GPLET is good for Tucson Unified School District (TUSD), which is the only school district impacted by Tucson’s GPLET deals. I asked to see the spreadsheet. Another politico recently told me that if the district’s property taxes don’t cover the money designated to the district, the state General Fund backfills the funds. If we give away more property taxes at the local level, we become more dependent upon the Legislature for school funding. (Here is the video.)

This is just a short list of spending bills that we have voted on– in advance of the budget. Basically– no one knows the cumulative fiscal impact of these bills (and the other tax cuts and tax credits) in the future. We need to fund the schools– before anything else.

21 Responses to Arizona Legislature: Tax Cuts R Us

  1. Frances Perkins

    The biggest problem with the one party dictatorship in Phoenix is the money giveaway in tax cuts and credits, while claiming,”we just don’t have the money.” Meanwhile roads and schools crumble, but prisons thrive. And they constantly whine about, “We just can’t throw money at the problem.” But somehow throwing money at more charters and laundering money for private schools is Ok. If they had any courage put the vouchers to the voters with a clear question, ” Do you support new taxes to pay for private school vouchers in anyway or in any laundered money format?” Of course they are only against initiatives and referenda when the voters don’t agree with them. When the voters agree with the one party dictatorship, they all bow down to the Constitution.

  2. John Huppenthal

    It can happen quickly at the national level with a big enough change, it did happen at the national level when Reagan reduced tax rates from 72% to 28%. Reagan had an 8% growth quarter, forever changing the trajectory of Social Security. Since 1980, the top 1% went from paying 47 billion in taxes in 1980 to 470 billion in 2007. But, even there, it took decades for all the behavioral changes to happen. Elasticity plays out over time.

    A 2 percentage point change at the state level will take decades to work its magic.

    Kansas is not now and has never been a low tax state. Even Arizona is not in the bottom ten in taxation because of our cities. Arizona cities are living examples of how you don’t get a return on spending. As frugal as Arizona schools are, AZ cities are big spenders, high in the national rankings. My city, chandler has been one of those eating highest on the hog. Since 1995, the percent of citizens rating the quality of service excellence has dropped from 55%, the highest in the state, to 38% still high but obviously not on the same upward trend as their costs.

    By comparison, the local school district, Chandler Unified has rise from 38% excellent rating by parents to 75% – three times the national average. A percentage that may be the highest in the nation for a school district with more than 10,000 students.

    • For Sure Not Tom

      Okay, Falcon9, Master of Sockpuppets, pop quiz time.

      How much is 47 billion from 1980 today in 2017 dollars?

      How many more people are in the 1% of the 1% since 1980?

      How many more people are there since 1980 and what affect does that have on your math (or lack of math skills)?

      See where this is going? Tomorrow, I’ll be happy to spend some of my Sunday correcting your math (aka conservative BS). But off the top of my head, for now, answer the pop quiz questions.

      You can pre-emptily stop me making you look like the incompetent buffoon by re-doing your math and admitting you’re an iD10T.

      Please show your work, because some of us are capable of critical thinking. We question everything and what works on some Teabagger chain email won’t fly here.

      I can’t believe you were in charge of education. I wouldn’t let you train my dogs.

      • John Huppenthal

        $47 b illion is about $150 billion in 2007. So, you are correct, the “real” increase is from $150 billion to $470 billion – nonetheless a massive Tsunami of additional tax revenue at a much lower tax rate – exactly as supply siders predicted.

        The top 1% in 1980 were AGI $80,000 or greater. Adjusted for inflation, that is $240,000 in 2007. So, that top slice went from paying 19% of all personal income taxes in 1980 to paying 56% of all taxes – leaving a much lower burden for the rest of us to pay.

        The enormous public policy success of this becomes hugely apparent when you compare us to other countries. People who pay no taxes in the US, the middle class, pay much greater burdens in Europe. Why? Because they have a much reduced crop of rich people to pay the taxes that otherwise everybody else has to pay.

        Result? The countries of the European Union went from a GDP 30% larger than the US in 1980 to currently a GDP 20% below that of the US.

        The bad policies you all advocate have real world consequences. The general welfare is less, prosperity is less. Your intellectuals are lying to you, you are believing them and retailing poison.

        • “So, that top slice went from paying 19% of all personal income taxes in 1980 to paying 56% of all taxes”

          Nice use of semantic sleight-of-hand here. Between sales taxes, payroll taxes, property taxes, state income taxes, and other regressive taxation, I would argue that the overall tax burden in this country is barely progressive, if at all. This is just using one small portion of the tax code to make the argument, but it seems you actually want regressive taxation.

          Take money away from poor people, so they have an incentive to work, but give more money to rich people, so… they have an incentive to work?

          • John Huppenthal

            Since when has paying 500 billion more in taxes been a “take away”.

            Your language is based on the “chicken illusion.” If you and I sit down to share a chicken, we are negatively interdependent. Any extra bite I take is at your expense.

            Economics doesn’t work that way. When someone starts up a company, it creates wealth. Everyone is positively interdependent.
            There is chickens for everybody. And, if you are not getting your fair share, you can quit your company and go to a new one.

            Just happened to someone I know very well. She was working for $24,000 without benefits for three years. She worked hard, really hard for that employer despite the low pay. One day later, she is working for $44,000 a year with great benefits. Her first job gave her all the experience she needed to get the second job. She is very happy to be working for a rich person. Indeed, she intends to do her best to make him much, much richer.

            Over 24 million people quit their jobs last year for one reason or another. That is the freedom number- keep an eye on it. Way up as we are escaping Obamanomics.

            The real debate is actually quite academic. What is the revenue maximizing tax rate? And, is that number different from the prosperity maximizing tax rate?

            Psuedointellectuals have made the false case that the number is 63% (Picketty, Saenze, Girth) by gross specification error. The things you talk about Ed. Failing to control for obvious factors the impact economic growth. Assuming for instance that population growth is fixed, something they all do.

            New research is coming out which bysteps elasticity of labor demand and directly computes elasticity of taxable income. This research indicates that the revenue maximizing tax rate is less than 25%.

            This body of research would indicate why the stock market is going up leaps and bounds. If Trump reduces the maximum rates down towards 25%, and this research is true, the economy will just explode.

            You democrats are in a state of absolute desperation. You have to destroy him before this reality is both created and unfolds.

          • All of what you have said is predicated on the idea that:

            A) People are paying anywhere close to 39.6% in Federal Income Tax (they aren’t), and

            B) People are earning that income from work (Most income accruing to the top 1% is asset-income, not wage-income, which is preferentially taxed. Even by your own admission with a 25% number, that suggests we should be increasing taxes on dividends and capital gains).

            Through no cost or effort of his own, this ‘very rich person’ is getting income straight into his pocket not from any work of his own, but because of claims to ownership over scarce resources.

            And the more inelastic the supply for that resource is, the greater the potential for markets to break down (monopoly power), as well as the less distortionary a tax is on the market. Hence the Georgist position to rely on a land (not property) tax, since the supply of land is virtually completely inelastic.

            I foresee a world where labor is going to be a lot less valuable and ownership of increasingly scarce real property, such as minerals, water, oil, land, and so forth, is going to be increasingly more important. This would be consistent with asset prices rising faster than the economic growth rate, which is in turn consistent with rising levels of wealth inequality in this country.

            Now, maybe lower asset taxes are needed, according to the classical argument, because it encourages capital investment and grows the productive power of the economy. But then, if that’s the case, why are nonfinancial Fortune 500 companies sitting on over $2 trillion in cash instruments, even given the current preferential treatment of asset income in the U.S. tax code? This seems to suggest that there isn’t much excess demand for real capital in the U.S. economy; increasingly, stock buybacks and dividends are the end result of corporate profits.

            Also, one last point; empirically, American Capitalism has been trending toward consolidation and toward winner-takes-all. Maybe that’s in-part due to regulatory capture; surprisingly, I think we can probably agree that there are bad policies in place which protect established firms at the expense of upstarts. Maybe economies of scale or barriers to entry will just automatically lead to that regardless of regulatory practices. As far as I’m aware, we don’t know that answer.

            (I’m also curious how much of the increase toward 24 million people quitting their jobs is due to the ACA mitigating the job-lock phenomenon on account of working to decouple health insurance from being tied to working for a large corporation which offers it as a benefit, given the disparity in individual vs. group rates.)

          • John Huppenthal

            No, it is not predicated on people paying anywhere close to 39.6% of the top rate personal income tax. Neither were they paying the 72% back in 1980.

            That’s exactly the point. When the rate gets down to 25%, everyone will pay it instead of going to the author of this blog to have him reduce it to 10% for a fee.

            That’s exactly what they found out when TEFRA passed. Tax preferred economic activity plummeted as total economic activity exploded. Tax accountants were on the ropes. They had to find real work for a living.

            Not only will they pay that 25%, but economic activity will be much more efficient.

            Jobs will be created by the bushel basket. What are you all going to whine about when job creation jumps to 400,000 per month?

            Ed, you genuinely seem to be concerned that there will be too many rich people. Rich people get rich by creating jobs and they never quit working. Steve Jobs worked until the last day of his life. He was our slave.

          • Mr. Huppenthal, I am concerned that the economic opportunities that were available to you however many years ago simply aren’t going to be available to the next generation. I fear that increasing levels of wealth concentration will continue to enrich a very few individuals, who will have inordinate economic and political power, and I do not believe that in general, this concentration of wealth and power will serve the public interest in the long run. Unfortunately, I think that we’re headed in the direction of a permanent aristocracy, which expands its wealth not by ‘working and creating jobs’ (your words; I haven’t seen evidence that trickle-down works), but by virtue of asset ownership and rents on scarce resources.

            Now, I’m going to again agree with you at least in part. There’s no need for U.S. households to need to spend $8 billion a year in compliance costs with the Federal tax code, an exemplary example of rent-seeking behavior by Intuit (i.e. Turbotax) and H&R Block, and why there are a stupidly high number of special deductions and credits, most of which don’t serve the public interest. If nixing inefficient deductions allows us to maintain government services and lower the marginal tax rate overall, I’m for it. I’m not here to defend high taxes for their own sake, but I am opposing tax cuts which I don’t think will have a positive impact on people who can’t afford to lobby for those special exemptions that wealthy folks (of all political leanings) stuff into the tax code.

          • It’s also worth noting that with regard to Trump and U.S. equity prices, that a survey of economists suggested similar opinions to what I have claimed on this blog – the market is rationally acting based on reasonable conclusion that Trump’s policies will increase after-tax corporate profits, but that his policies are unlikely (or at least less likely than a coin flip) to materially increase economic growth forecasts.

            http://www.igmchicago.org/surveys/trump-and-share-prices

    • For Sure Not Tom

      Oh yeah, throw in some fancy GDP comparisons, too.

      I can’t believe you still post online where everyone can see.

    • AZ BlueMeanie

      I’m shocked that Thucky is not promoting the so-called Trump Rally in the stock market, the talking points of President Trump, who likes to tout the booming stock market as evidence that he is already boosting the economy.

      Just one big problem: Those stock market gains will overwhelmingly benefit the richest Americans. http://www.npr.org/2017/03/01/517975766/while-trump-touts-stock-market-many-americans-left-out-of-the-conversation

      “Of the 10 percent of families with the highest income, 92 percent owned stock as of 2013, just above where it had been in 2007. But ownership slipped for people in the bottom half of the income distribution, and to a lesser degree for people who were above the median but below the top 10 percent.

      Those richest Americans own far greater amounts of stock. As of 2013, the top 10 percent of Americans owned an average of $969,000 in stocks. The next 40 percent owned $132,000 on average. For the bottom half of families, it was just under $54,000.

      Combine the uneven ownership rates and ownership amounts, and the total inequality in the stock market is astounding. As of 2013, the top 1 percent of households by wealth owned nearly 38 percent of all stock shares, according to research by New York University economist Edward Wolff.

      Indeed, nearly all of the stock ownership in the U.S. is concentrated among the richest. According to Wolff’s data, the top 20 percent of Americans owned 92 percent of the stocks in 2013.

      Put another way: Eighty percent of Americans together owned just 8 percent of all stocks.

      [T]he massive disparities in stock ownership are important for two reasons: One is that when a politician brings up the stock market as a measure of economic success, that success isn’t very relevant to many Americans.

      * * *

      While half of Americans benefit from the stock market (the richest far more than the rest), many lower- and middle-class Americans don’t even have the retirement accounts that constitute many middle-class Americans’ stock ownership.

      More than one-third of Americans working full time have no access through their employers to either pensions or retirement investment accounts like 401(k)s, according to the Pew Charitable Trusts. Many national-level politicians occupy a world where stock ownership is a fact of life. But that’s not true for many of the people they represent.

      * * *

      [N]on-stock owners could see a potential upside to the improving stock market through what’s known as the “wealth effect.” The basic idea is that when the stock market improves, wealthier folks feel better about their finances and therefore spend more. ”

      Just one problem: the wealth effect was achieved. “We made wealthy people wealthier,” former Dallas Fed President Richard Fisher said. “But the point is it didn’t trickle down.”

      • John Huppenthal

        Any reader who is a retired police officer, teacher, state or local government worker instantly knows the dishonesty of Blue’s analysis.
        They are the beneficiaries of trillions invested in the stock market. The future of their families depends on stock market health.

        Just as importantly, the stock market is a barometer on the future of over 5,000 companies. The Fortune 500 alone employs over 20 million people.

        Nobody can know if the current market is a bubble. The stock market was just at 700 when Reaganomics kicked in. In 35 short years, it has added 24 trillion in value. For people used to depression era economics, the entire 35 years of Reaganomics seems like a bubble.

        If tax reform goes through, Republicans could rule for 50 years.

  3. pamela another single parent was deported . what are you doing about it? do you have the courage to stand up and tell all arizona not to serve on federal jurys until these parents are brought home to their children? otherwise the posters here are just counting the box cars heading to deportation auschwitz instead of trying to stop the train!

  4. bruce.desertrat

    And Il Deuce is on the front page of today’s paper talking up how he’s going to ask the feds for a bunch of money to fix roads “because he doesn’t want to raise taxes”.

    And For Sure Not Tom, they weren’t lying about that “trickle down thing”, just about what’s trickling down on us…

    • I heard that on the radio. Ducey has quite a list of stuff he wants the feds to pay for. If we stop giving away $4 billion a year in tax cuts, $400 million a year in tax credits and who knows what in unnecessary lawsuits, we could pay our own bills.

  5. pamela did you get your era bill passed.?

  6. For Sure Not Tom

    Falcon9 has pointed out many times that we are now rolling in the dough, trillions in Trump monies have been created using secret equity magic.

    DOW 21,000! Woot!

    And that’s always been the promise, right? Cut taxes, the rich get richer and start to trickle on everyone else, the state coffers start overflowing with sweet, sweet Benjamin’s, and everything will be fully funded, with limos picking up the kids for school.

    Unless they were lying about that trickle down thing…