The railbird reporting this week is that state senator Steve Farley (D-Tucson) is considering running for governor in 2018 against Governor Doug Ducey. Tucson Democrat Farley considering run for governor in 2018:
Farley told Capitol Media Services on Tuesday that the tax cuts enacted during Ducey’s administration have left the state’s K-12 and higher-education systems without adequate funding.
Instead, he said, the governor’s policies seem to rely on the idea that tax breaks will grow the economy through new corporations moving here. In fact, Ducey has not only promised to propose tax cuts every year he is governor but said he will drive the state income tax rate to “as close to zero as possible.”
Farley said that recipe makes no sense.
“The large corporations won’t come here anymore if we don’t have a workforce that’s trained to be able to work for them,” he said.
Farley is focused on the state’s tax policies and how he believes they can be improved.
He conceded that by the time of the 2018 election many of the tax cuts previously approved by the Republican-controlled Legislature will already have kicked in. That includes a 30 percent reduction in the corporate income tax rate and a change in the law that allows some manufacturers who do not sell their products in Arizona to entirely escape state corporate income taxes.
“Yeah, but it could get much worse if he gets reelected and carries through on his promise to eliminate the state income tax,” Farley said.
But the Tucson Democrat is looking to do more than simply keeping tax rates from going any lower. He is targeting the exemptions on what is subject to the state sales tax.
Calculations by Capitol Media Services show that if every transaction were subject to the state’s 5.6 percent sales tax, the state would collect at least $12.2 billion more a year. That compares with $4.3 billion the state actually took in last budget year.
Farley calls those exemptions “loopholes.”
Note: In every year that he has been in the legislature, Farley has sponsored a bill to close these tax “loopholes” by ending the most egregious examples of tax exemptions. His oft-repeated favorite example is the infamous 4-inch pipe exemption. Fact Check: Farley right on revenue lost from tax exemptions (2014):
Arizona has nearly 200 exemptions to its sales tax, ranging from groceries to 4-inch pipes used to transport water, gas, oil or coal slurry. Farley . . . has pushed legislation to end some of these exemptions.
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BOTTOM LINE: Based on the best estimates available, repealing sales-tax exemptions, preferential rates and credits could have earned the state more than $12.1 billion in fiscal 2013 and $12.6 billion in fiscal 2014. Because the Department of Revenue isn’t able to calculate potential costs of many of these exemptions, the actual number is larger still.
Back to the reporting:
Farley conceded, however, there are reasons behind some of those exemptions, including political.
For example, Arizona does not tax the sale of food from grocery stores intended for home consumption. The Department of Revenue estimates that eliminating that exemption would bring in about $414 million a year.
[Farley has not proposed ending this exemption.]
Then there are policy decisions like taxing only the final purchase. That compares with a European system of “value-added” taxes, where every transaction is taxed each time a product or service changes hands.
That exemption adds up to $4.1 billion.
And services also are generally exempt, including nearly $2 billion that would be collected from medical and hospital services and an additional $1 billion in professional, scientific and technical services.
[Our neighboring state of New Mexico taxes services rendered. It’s not a novel idea.]
But Farley said there’s probably $2 billion to $3 billion in “low-hanging fruit.” One particular target is the $1.5 billion exemption for the sale of pipes and valves 4 inches in diameter — not larger or smaller — to transport oil, natural gas or coal slurry.
“We could actually reduce the overall sales-tax rate and cut out a bunch of these loopholes that aren’t doing anything for the economy … and gain revenue while reducing the rate,” he said.
Farley has had no success in advancing his bills to close tax loopholes in Arizona because of Prop. 108 (1992), the “Two-Thirds For Taxes” Amendment which requires a two-thirds majority of each chamber of the legislature to vote to either increase taxes, or to reduce or eliminate tax exemptions or tax credits. This allows a tyranny of a minority of GOP anti-tax zealots, often doing the bidding of the special interests who benefit from these tax exemptions and tax credits, to prevent any meaningful tax reform in Arizona.
Sen. Farley and his Democratic caucus needs to endorse the repeal of Prop. 108 and get it on the ballot if they really want to get serious about tax reform in Arizona.
Farley is calculating his chances of winning based upon a pretty thin rationale:
There are more than 1.2 million Republicans registered to vote in the state. Democrats, with nearly 1.1 million registered voters, actually trail independents by nearly 128,000.
But Farley said it works to his advantage that the state’s gubernatorial race is not the same year as the presidential contest.
“Traditionally, when you look at the first off-year presidential election for this state, folks go heavily against the party in power in D.C.,” he said. And Farley is counting on disenchantment with both the Trump administration and the Republican-controlled Congess.
He also pointed out that the last time Arizona voters choose a Democrat for governor was in 2002 — and again in 2006 — electing Janet Napolitano. And both years there was a Republican in the White House.
Sorry Steve. That was then, this is now. Janet Napolitano won in a squeaker in 2002 based upon the strength of the voter turnout in favor of ballot propositions for gaming compacts with native tribes (which led to casinos). Napolitano won reelection four years later because the GOP nominated a religious extremist, Len Munsil, the founding President for the Center for Arizona Policy. These favorable conditions do not exist now.
Here are some factoids for Steve Farley to consider:
Just under two-thirds of the voters in this state live in the state of Maricopa. Name ID in the state of Maricopa is critical.
The last time Arizona voters elected someone from Southern Arizona for governor was in 1974, when they elected Democrat Raul Castro.
In 2014, Fred DuVal collected $4 million from donors, setting a record for a Democratic gubernatorial candidate.
But Doug Ducey raised $4.5 million from donors — and loaned himself another $3.5 million. Ducey still has a fortune from which he can self-fund.
More than $6.4 million from outside “dark money” groups — primarily connected to the “Kochtopus” network operated by Sean Noble at the time — was spent on attack ads against DuVal. That was three times the amount of independent-expenditure dollars that were spent against Ducey.
Ducey is a Koch-bot, in the mold of that other Koch-bot, Governor Scott Walker of Wisconsin. The “Kochtopus” has unlimited financial resources and it will spend whatever it takes to protect their investment in maintaining control over the state of Arizona.
The Arizona legislature last year changed election laws in Arizona to make spending by anonymous sources of money even easier. And we have a Secretary of State who is no longer interested in regulating the flow of “dark money.”
There is always the GOP-friendly media structure in Arizona. There is no Democratic or “liberal” media in Arizona, other than a couple of weeklies and blogs like this one. It will be difficult to get your message out.
Think long and hard, Steve. You may be better off challenging Rep. Martha McSally for Congress. CD 2 is more favorable to run in than a statewide contest. But keep in mind that McSally will be able to raise a ton of money as well, because the GOP will protect their “rising star” and projected successor to Sen. John McCain.