Harper and Biggs’ 3500% Stealth Business Tax-Break

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Posted by Michael Bryan

Gift-Tax-RulesState Representative Jack Harper and State Senator Andy Biggs are planning a stealthy gift to Arizona businesses. They want to increase the property tax exemption for business by a whopping 3500%, while sticking homeowners with the bill for the difference.

This is how the grift works:

The current property tax exemption for business property is $68,000. So businesses currently don't pay taxes on the first 68K worth of property. Small businesses rejoice! Our GOP benefactors want to increase that by 3500% – to $2.4 million. Big businesses rejoice!

You might ask, "So what? Businesses pay less. Great! What does that have to do with me?" Great question.

Counties compute the property tax rates they need to charge every year with a formula that basically plugs in the taxable property in the county, and spits out the needed tax rates. By exempting a whopping slice of business property from taxation, the rate that homeowners will pay to maintain current service levels from their county governments will have to go up – way up.

The political problem Harper and Biggs face in their quest to free business from the tyranny of taxation is that voters have to approve this change: the Arizona Constitution sets the exemption. So they have to refer the matter to Arizona's voters (and homeowners) for approval.

Seems like it could be a problem for their little scheme.

So how do Biggs and Harper expect homeowners not to cry foul at this big shift of property taxes onto their backs? First, by applying the old frog in a pot technique. Second, by disguising the actual dollar amount.

The new exemption will only apply to new business property; the old exemption will remain for existing property. So as businesses buy new property and replace outdated or worn-out equipment, their share of the property tax bite will steadily decrease. It is expected that the full impact of the new exemption won't be felt for about 20 years. By that time Biggs and Harper will be long gone – and your property taxes will be sky high.

The language that they use to set the new exemption is a bit tricky, too. Instead of saying that the exemption will be increased to, oh, $2.4 million dollars, they instead use a little common-touch misdirection. The bill, and presumably the ballot measure, instead sets the exemption at the average wage of 50 Arizona workers. Well, doesn't that sound nice?

Only problem is no worker will actually benefit of it; it's only for businesses. So why the populist "50 worker" shuck and jive? Well, to conceal the amount of the exemption, of course.

So little Mr. Home-owning Worker Frog, feeling warm yet?

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Michael founded BlogForArizona as the Howard Dean campaign blog for Arizona in 2003, and has been blogging ever since. Michael is an attorney living in Tucson with his wife Lauren Murata. In 2008, following some health issues and new time constraints, Michael stepped back from regular blogging and began remaking BlogForArizona into a collaborative project. Michael now contributes occasionally to the blog and provides editorial and publishing direction. Also if you want to keep up with the latest Arizona and National political news that Mike finds important, check out the BlogForArizona twitter feed, which he curates.

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