The sheer volume of tax credits, tax cuts, tax shifts, and miscellaneous tax giveaways in this Legislative session is mind boggling. Will the Arizona House pass one billion dollars in tax giveaways in 2020? It could happen. To say that this behavior is fiscally irresponsible is a gross understatement.
The House Ways and Means Committee has passed 18 tax giveaways in 2020, and those bills are now hitting the House floor for debate and votes. Six of the 18 already have passed the House: HB2355, HB2356, HB2293, HB2732, HB2778, and HB2779. (See descriptions below.) These six will eliminate hundreds of millions of dollars in future revenue from the General Fund, and there are 12 more tax giveaways to be voted on. As noted in previous blog posts, these tax giveaways primarily benefit large corporations– like Microsoft, APS, TEP, SRP, SW Gas– specific business groups or industries, and wealthy Arizonans.
It is often said that a budget is a moral document. In our state budget, the Legislature supports corporations and wealthy Arizonans with never-ending, multi-year tax giveaways, that often have inflation adjusters. Arizona wouldn’t have an affordable housing problem, crumbling infrastructure, and grossly underfunded education system if the Legislature had long-term plans and multi-year, inflation-adjusted budgets to address those problems. Instead, programs and services that benefit the people of Arizona are lucky to get one-time funding and beg for more each year (or pass citizens initiatives). We don’t have a budget surplus; we have chronically underfunded programs.
Remember, most of these giveaways have no end date, no sunset review, no measurable economic development goals, no employment goals, and no estimated cost. YES, the Arizona House is poised to pass 18 new tax giveaways, many of which will automatically increase over time, and we don’t know the total cost.
Chairman Ben Toma, who is the primary sponsor on several the tax giveaway bills, praised Arizona’s robust economy and full employment — echoing Governor Doug Ducey’s State of the State address– and said that “everybody knows” that the best way to keep the economy performing like this is “broad-based tax cuts and deregulation.” OMG. I like Toma. He’s a friendly guy and a fair chair, but we couldn’t be farther apart economically.
At a recent Ways and Means Committee meeting, Kevin McCarthy from ATRA congratulated the Legislature for giving away close to a half-billion dollars in tax revenue in 2019 “without a spreadsheet!” He cheered the idea that Legislators had charged forward .. on gut instinct, I guess… and cut taxes without knowing the fiscal impact… because, apparently, real men don’t use spreadsheets.
Seriously, does anyone think this is proper way to run a government?
Although I take no offense, I believe the spreadsheet comment was a thinly veiled jab at Rep. Mitzi Epstein (Ranking Democrat on W&M) and myself because we are perpetually asking for the annual and long-term costs of the tax giveaways. We should know the total cost before we enter into any tax giveaway deal– especially those that don’t end and are scheduled to increase automatically!
Furthermore, what is the total annual revenue loss of all 18 of these tax cuts taken together? HB2732 alone is hundreds of millions of dollars over 20 years and increases every year up to the midpoint. Other giveaways are $100-300 million per year, but many have no cost estimates. There are several bills that tinker with income tax in different ways; I’m not even sure if they work together if they all pass. Do the Republicans talk with each other?
With these 18 bills, we could be giving away a billion dollars a year in revenue when HB2732 hits its peak in about 10 years. Will we able to afford that? Who knows? Will we be able to afford the hundreds of millions of cuts that will take place next year as a result of votes that will take place next week? We are tying the hands of future Legislatures and putting valuable programs in jeopardy by making multi-million-dollar decisions “without a spreadsheet”– without knowing the bottom line.
Also, let’s not forget that it takes a two-thirds vote of the Legislature and the signature of the governor to get rid of any of these tax giveaways. In my opinion, the Republicans are trying to break the bank on purpose, in addition to 18 tax giveaways in the House there are more in the Senate, plus multiple bills that eliminate or reduce random fees. This is fiscally irresponsible.
Arizona has an affordable housing crisis. Wages in Arizona are 85 percent of the national average. We are the worst state in the nation for Adverse Childhood Experiences. We have shortages of teachers, nurses and doctors because wages and reimbursements are low. Only 6 percent of the people who are eligible for Temporary Assistance to Needy Families (TANF). We do not have a budget surplus. We have a government that is guided by ideology– not spreadsheets.
We could make significant inroads into our state’s problems by investing now to strengthen the future generations… rather than implementing a massive tax giveaway plan that will cheat future generations.
[P.S. You may remember that during the House of the 53rd Legislature (2017-18) most of the tax giveaways were defeated– including major corporate defeats. So, what happened? Many of the Libertarians and Progressives who consistently voted against tax giveaways– for completely different reasons– are not in the House in 2020, due to term limits, retirement, defeat, family obligations, or moving to the Senate. Darn it.]
Here are the six tax giveaways that passed on Feb. 19, 2020…
HB2002: student apprenticeship program; tax credits. This sets ups informal apprenticeships where businesses can train new workers (like high school students). There were many questions about how this would work. Also, these wouldn’t be of the quality of apprenticeship that one would get from a union.
HB2837: income tax credits; employment. This is similar to HB2002 in that both offer tax credits for businesses who hire low-level workers, particularly high school students, and “train” them.
HB2290: renewable energy production; tax credits. This is a tax break for solar energy generated by electric utilities. The business owner who testified in committee complained that the Trump Tax Cut and Jobs Act (TCJA) eliminated some tax giveaways that her company used. She also said that Trump’s tariff wars are hurting her business. Consequently, she’s coming to the Republicans in the Legislature to fix what the Republicans in Congress and President broke in Dec. 2017. This is perhaps the third or fourth bill that Ways and Means has heard that fixes problems the TCJA created. (I have no sympathy for business people who don’t like what their businessman President did to them. Take your Congressional problems back to Congress.)
HB2352: centrally assessed property; valuation; pipelines. A pipeline company wants to pay less tax. This was previously held in committee.
HB2676: veterans; income tax subtraction; increase. This bill decreases the income taxes that military vets pay on their pensions. The retired top brass write to me every year for a tax break. This bill would cost $44 million per year. If we want to help vets, let’s help the vets most in need. Let’s get them off the streets, into apartments, into clinics and back on the road to wellness. As long as there homeless vets in wheelchairs on the streets, the retired generals can wait for a tax break.
HB2752: individual income tax; rate adjustment. This bill sets up new income tax tables that are a flat fee + a percentage of income over a certain amount. (I have no idea where this plan came from or how it would work with the multiple other income tax reduction bills. Don’t the Republicans ever talk with each other? There are a number of overlapping and somewhat redundant bills. For example, HB2002 and HB2837 both offer tax credits to businesses to encourage them to do the right thing and give younger workers a chance.)
Here are two previous blog posts with bill numbers and additional information about corporate tax cuts…
Many of these tax giveaways automatically increase over time. This is irresponsible fiscal policy. Our country is being run my a mad man, markets are in turmoil, trade wars and real wars abound, too many people are living paycheck to paycheck, and too many Arizona children are living in poverty. Cutting taxes now and on into the future is folly.