Instead of “Ditat Deus” (God Enriches), Arizona’s motto should be “Tax Cuts R Us.”
Today in the Ways and Means Committee, we heard three tax giveaway bills: HB229 (corporate welfare for utility companies); HB2355 and HB2356 (increases to the 25% charitable tax credit passed in 2019); and HB2358 (increases to the dependent tax credit).
HB2293 exempts the purchase of electric storage units from sales tax (AKA Transaction Privilege Tax or TPT) and from use tax. When I asked Rep. Tim Dunn, the sponsor of the bill, who benefits from this, he said the utility companies benefit from it, but consumers will see a financial benefit because their rates will go down. (Really? When has that ever happened?)
The industry lobbyist made many circular arguments trying to convince us that giving utilities a tax break was good for consumers. Currently, there are eight rate increase cases before the Arizona Corporation Commission (ACC), including rate increase requests from APS and other electric utilities. When I started talking about rate increases and the relationship to infrastructure investment by utility companies, Committee Chair Ben Toma said that I was off-topic. Dunn and the energy lobbyist were the ones that said giving APS, TEP and SRP a tax break was going to lower costs to consumers. I believe that I was totally on topic when I said that these things were likely to raise our rates in the long term, not lower them.
Arizona utilities make money when they invest in infrastructure because these investments allow them to go back to the ACC for higher rates. The electric utilities are all-in on solar, as long as they build the solar farms. Utilities make an 11% return on their infrastructure investments when they go back to the ACC, according to energy guru and LD9 constituent Robert Bulechek, who visited me today after committee. So, if the utility companies invest in renewable energy like wind farms are solar farms and buy storage batteries to store this renewable energy, the ACC will likely reward them in the future. I don’t see why the citizens of Arizona have to give them a tax break; the system is set up for them to make money. HB 2293 has no sunset date and no cap on the cost. The Republicans have no idea what this tax break will cost the citizens of Arizona either.￼
HB2355 and HB2356 are both methods in increase the 25% charitable tax that the Republicans passed in 2019. In committee, they referred to trying to “fix the problem from last year. “What they avoided saying is that they have been trying to fix the problems caused by the Trump Tax Cut and Jobs Act from December 2017.￼ You’ll remember that the TCJA lowered corporate taxes dramatically and created the Opportunity Zone capital gains tax cut (because the rich aren’t rich enough). To pay for the governmental largess to the 1%, Congressional Republicans made sweeping changes to the federal tax code including eliminating the charitable tax credit (for five years), doubling the standard deduction, eliminating some other deductions, and much more. The TCJA represents the most sweeping changes to the US tax code… ever… and it was passed *without debate* by the Congress.
How are the Arizona Republicans suggesting that we fix problems created by a Congressional Republicans? More tax breaks, of course. HB 2355 indexes the amount the taxpayers can deduct for charitable contributions to the consumer price index of Metro Phoenix.This means that the tax cut that was passed in 2019 will automatically go up every year with no end date, no sunset review, and no cap on the revenue losses. Remember, they are trying to “fix” the temporary loss of charitable deductions with permanent and ever increasing tax credits. This is fiscally irresponsible.
HB2356 raises the 25% charitable tax credit to 50% in one year. Arizona lost $24 million in revenue from the general fund when we passed the 25% charitable tax credit in 2019. Doubling it, will likely double the general fund hit to ~$50 million. I asked Toma about this. At first he agreed with me that we could lose double the revenue, but he quickly fell back to the Republican talking points that this is not the state’s money. If 2355 and 2356 both pass, this will really ratchet up the losses to the general fund pretty quickly. Again, they are lobbying for a permanent and continuously increasing tax credit to make up for a temporary loss of the charitable tax credit.￼
We don’t know the total cost of these tax giveaways in terms of lost funding, lost benefits or lost services.
HB2358 sets the dependent tax credit on a path to increase continuously also. As passed in 2019, the dependent tax credit is $100 per dependent under 17 and $25 per dependent over 17. It is not exclusive to children who are dependents and has no limit on the number of deductions one can claim. HB2358 would link this tax credit to the consumer price index also. This is estimated to reduce the general fund by $144 million, but the cost is hard to calculate.
Just to recap, Republicans passed four tax giveaways out of the House Ways and Means Committee today. None of them had sunset review dates or caps on general fund revenue losses. There were no loss projections for two of these bills. In other words, we don’t know what these giveaways will cost in terms of lost benefits or services to the public. Two of the giveaways were set to automatically got up every year and never go down. The two giveaways that do have guestimates rack up close to $200 million in lost revenue.
The other day one of my House Democratic caucus colleagues said that when he graduated from high school in Arizona we were at about 25 out of 50 states. We are at the bottom in almost every category in education. It would take billions of dollars in education investment to get Arizona back to middling– not to mention all of the other programs that were cut and never restored like TANF and Healthy Families. The idea that we would give away any taxes when we are shortchanging our children and grandchildren is ludicrous. We are throwing away future generations by not adequately educating them and their parents and forcing them to live in poverty. Arizona has stingy short-term policies that cost money in the long term.
It is fiscally irresponsible to continue to pass tax cuts — particularly tax cuts that automatically increase– when we have not fully funded public education or anything else that was cut during the Tea Party Reign of Terror. It’s time for fiscal responsibility. #EnoughIsEnough