Monday, February 21, 2011

Running on Empty in Arizona

Arizona Senate President Russell Pearce

“That is what we ran on,” said State Senate President Russell Pearce, hailing the approval by both houses of the Arizona state legislature of what Republicans are calling the “Jobs Bill.” Gov. Jan Brewer signed the business tax-cutting bill on Feb. 17, just four days after it was introduced in the state legislature.

Arizona, whose housing-driven economy has been stagnating since 2007, badly needs new jobs, but the bill doesn’t deliver jobs only tax cuts for corporations and business owners. The state’s Republican leadership – which controls all branches and aspects of government – had hoped to pass the bill (SB1001/HB2001) last year but withdrew the tax-cut proposal after deciding that it wouldn’t sit well politically to be cutting corporate taxes while at the same time increasing sales taxes in their last-minute attempt to balance the budget.

Despite the massive budget deficit facing Arizona – estimated to be as much as a third of the already slashed annual state budget – tax cuts for business proved to be the fiscal priority for the new legislature. No surprise, because, as Pearce boasted, that is what the Republicans promised the Arizona electorate.

Since 1992 the Arizona legislature has cut taxes almost every year in 42 separate bills. Yet the new Jobs Bill is being hailed by House Speaker Kirk Adams as “an historic bill [that] represents the largest tax cut in Arizona history.

The title of the bill, approved in this special budget-slashing legislative session called to order by Governor Jan Brewer, is not as appealing as Jobs Bill. It’s the “Arizona commerce authority; business incentives” bill. According to the Joint Legislative Budget Council, the bill makes “several changes to Individual and Corporate Income Taxes and Property Taxes and creates the Arizona Commerce Authority.”

Despite having the nation’s largest structural budget deficit, the Republicans passed this bill whose estimated cost, according to the legislative council, will be $38.2 million in FY 2012, growing to $538 million in FY 2018.”

According to Pearce, this bill, described by its supporters as a “pro-growth tax reform,” will “bring jobs to our state and re-establishes Arizona as a national economic leader.”

In addition to gradually cutting the corporate tax rate from 6.49% to 4.9%, the so-called Jobs Bill will create the Arizona Commerce Authority, a new unaccountable government agency that will hand out lottery money to businesses with investment plans. According to the bill, the commerce authority will be “exempt from state general accounting and finance practices.”

The bill “puts our state in a very competitive position for job creation,” said Pearce, who authored the senate bill. “While other states are raising taxes and doing everything they can to force businesses out of their state, Arizona is putting out the welcome mat.”

But there is, of course, no guarantee that businesses will come. According to the budget council, the bill by lowering the cost of doing business “may generate more tax revenue dollars for the state.” Yet there have been no studies to demonstrate that the incentives will attract more investment at a time when people and businesses are fleeing the state. Last year was the first time in fifty years that Arizona lost population – driven away by SB 1070 and the collapse of what former (and ousted) Arizona Republic columnist Jon Talton calls the “Real Estate Industrial Complex.”

Gov. Brewer signs "Jobs Bill" Feb. 17/Arizona Republic
Economic consultant Elliott Pollack, an influential proponent of this complex, authored a report (that was commissioned by House Speaker Adams) that provided the economic rationale for the jobs bill. Pollack, who runs a real estate consultancy in Scottsdale as well as a pro-corporate think tank called, recommended an array of businesses incentives to boost profits, selling it as a trickle-down strategy to create jobs.

 Opposing the jobs bill when it was first introduced last year, Dana Wolfe Naimark, president of the Children’s Action Alliance (part of the 50-member Arizona Budget Coalition), said: “Both voters and businesses expect our state to provide the assets we need for a strong economy — assets like roads, parks, health care, and a world-class education system. But twenty years of tax cuts have left us short on these assets and contributed to the deficit we suffer from now. More of the same tax cuts will only make Arizona less competitive.”

Like Pearce in the Senate, Adams in the House is promoting the bill as an anti-government measure. “With passage of the Jobs Bill, we are putting our confidence in the private sector and hard-working Arizonans rather than in government. As our federal government has demonstrated, spending more on government doesn’t create jobs,” said Adams. 

“We have not seen such an aggressive reform of our tax policy or efforts to spur the creation of jobs in at least two generations," asserted Adams. "With this bill we are lighting up in big bold neon letters for all the world to see: ‘Arizona is open for business.’”

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