Should the Arizona Legislature help Microsoft pay its APS bills?
Tuesday was a light day at the Capital. There was no floor action, but I had time to catch up with colleagues and sign some of their bills. I wanted to tell you about the conversation I had with two Microsoft lobbyists about the tax break that Microsoft wants.
You may remember my blog post on Powers For The People (back in December) about the tax review committee that I was on, due to my membership on the Ways and Means Committee. One of the income tax credits that we reviewed was for an Apple international data center to be built with renewable energy in Mesa. At the time, Apple was offered a TPT (sales tax) break also, but the committee reviewed only the income tax break.
The lobbyists were in my office because Microsoft wants the TPT tax break that was offered to Apple. I told them that I really don’t support tax giveaways to multinational corporations. Period. I don’t support any tax giveaways when ~68% of Arizona women aren’t getting first trimester prenatal care, and that is contributing to AHCCCS wasting $2-4 billion dollars on premature births (Not to mention the long-term health effects of prematurity.) When thousands of Arizona mothers and their children are living in poverty with food and housing insecurity, why would I prioritize a tax break for one of the most successful corporations in the US?
The lobbyist told me that the reason Microsoft needed a TPT tax break because “electricity is too expensive in the state of Arizona.” Microsoft doesn’t want to pay sales tax on electricity for this giant data center. International data centers take a use a lot of electricity because it is a building full of servers and cooled to ~65 degrees. This particular tax break is related to data centers built with renewable (solar) energy, which will already lower their energy cost significantly.
One of the prevailing messages from the grassroots in 2018 was: no more tax giveaways until the schools are fully funded. Republicans didn’t get that message. They also didn’t get the Invest In Ed message that we — the people– think the rich could pay more in taxes to help fund education.
The Republican budget cuts income taxes, TPT and fees by $386 million and leaves education and other needs underfunded (or unfunded).
We started the year with a $1 billion surplus to invest in the People’s To-Do List: education, infrastructure, healthcare and safety and security. The Republicans have added bits of money to these areas — just enough to make it look like they’re doing something— but the need is much greater.
Republicans are ignoring multiple crises that are brewing in our state including unnecessary maternal and child death; rock bottom education funding; crumbling roads, bridges and school buildings; lack affordable and low-income housing; the shortage of teachers, doctors and nurses; too many people living in poverty; lack of access to affordable healthcare… need I go on?
Many constituents have asked me where the budget is and what’s going on– after all, it is May. On the budget, the status quo of the past month still exists. All of the budget action continues to be behind closed doors, among a closed group of Republicans.
In addition to the Democrats, there are a significant number of House Republicans who are not part of the budget process, and they’re grumbling about it. This is a state budget– not the budget for a small town church. The deacons and the pastor don’t get to decide the budget on their own in the back room. The budget should be negotiated with all parties at the table– not just a handful of those close to power. Democrats make up 48 percent of the Arizona House. When more than 50 percent of the Legislature is kept in the dark and has to rely on rumors, that is not a fair process, and it ultimately hurts the people of Arizona.
Except for the Governor’s budget, which has been public for months, and some leaked details about the Senate Republican budget, little is known about the budget, beyond a few trial balloons. What we do know is that the Senate Republican budget is far more conservative and not even close to Governor Doug Ducey’s budget.
This chasm in the GOP has left an opening for Democrats. The House Democrats will unveil our balanced budget ideas on Wednesday morning at 9:30 a.m. We have been saying since January that we agreed with parts of the governor’s budget– like full tax conformity and more money for P-20 education. [Stay tuned for details.]
On the right, Senator J.D. Mesnard and other tax cut fans still want to zero-out the money the state could bring in from tax conformity (~$150 million) and Wayfair (~$85 million). There are multiple trial balloons about making the income tax rates flatter. One proposal is to have only two personal income tax brackets. This is a horrible idea– unless, of course, your goal is to return to austerity and Draconian budget cuts, while making your rich donors happy. Under the Republican proposals to eliminate or lower tax brackets, rich people would pay less, and the rest of us could pay more. (Think of the Republican tax bracket plan as Arizona’s mini-Me to the Trump Tax Cut and Jobs Act. Both significantly lower taxes for the wealthy by reducing the top tax rate.)
If you often scratch your head at the bad bills that the Republicans pass in Congress and in the state legislatures and wonder what their end game is, you should read Democracy in Chains by Nancy McClean.
What you may think are random bad ideas that have somehow gotten into law are actually part of a grand scheme that has been playing out since Brown versus the Board of Education attempted to desegregate public schools in the United States.
An academic, McClean has studied the articles, books and letters of James Buchanan, the economist not the former president. Buchanan was the primary theorist of public choice theory. In the 1950s, public choice theory was used as a rationale to close all of the public schools in the state of Virginia (rather than comply with desegregation) and is being used today to support state-funded vouchers for private and religious schools. In Virginia in the 1950s, the state gave money to white parents for private school vouchers and allowed hundreds of black children to go uneducated for years. Needless to say, this was a travesty of justice.
This is the last week to hear House bills in the House and the Senate bills in the Senate. This means that despite the fact that the Democrats hold 48% of the seats in the Arizona House, we are spending this week hearing hundreds of nonsense bills from the Republican Party. How many rights can they restrict or how many taxes can they cut for the rich in just a few days?
Although we have had several weeks with very little action on the floor of Arizona House, like college freshman facing a big exam, the Republicans are going to push forward in after- hours meetings.
In Ways and Means on Wednesday, we heard another Republican run at “almost revenue neutral” tax conformity (which would generate $10 million instead of $0. The $0 plan was vetoed by Governor Ducey.) HB2526 passed along party lines with Chairman Ben Toma calling full tax conformity (which would generate $150-200 million for the state’s general fund) an “illegal tax increase.” When I explained my vote, I reminded everyone that the Legislative Council ruled full conformity was not a tax increase. If HB2526 passes, everyone who has filed their income taxes already will have to do an amendment; it also decouples our tax forms from the feds, which makes filing less convenient. The Republicans also passed HB2703 to delay the filing date for state income taxes to June. This just gives them more time to push their tax cut agenda.
The Arizona House is moving at a snail’s pace this session. In fact, Senator David Bradley has quipped that the Senate should take a one-month vacation so the House can catch up.
According to the Chief Clerk, as of Friday, the end of the fifth week of session, 744 House bills were dropped. Forth-seven percent of the bills (349)– including the Equal Rights Amendment (ERA)– have not been first read (the first step in the process). Only 50 bills (7%) have been third read (the final vote). We voted on about half of those 50 on Thursday afternoon. The coming week will be NUTS because it is the final week for the House to hear House bills and for the Senate to hear Senate bills. At this point, there are a lot of bipartisan bills on the cutting room floor in the Speaker’s office.
With a 29-31 (D-R) split in the House, Speaker Rusty Bowers has been extremely cautious about what bills get to the floor for debate and a vote. Except for tax conformity, nothing controversial has made it to a “third read” vote. The vast majority of the bills we have voted on thus far passed through committee unanimously and passed the floor unanimously (or with just a few dissenters from one side or the other). We have had lively debates on ideological bills in my committees– Regulatory Affairs, Ways and Means, and Health and Human Services– but those bills haven’t made it to the floor yet. For example, Republicans on the Regulatory Affairs Committee passed a sub-minimum wage for workers under 22 who are also full-time students. Republicans on the Ways and Means Committee passed two different an income tax breaks to the wealthiest Arizonans. Republicans on the Health and Human Services Committee passed a bill labeling pornography as a public health crisis. (What about gun violence as a public health crisis?)
What has been left unheard in committee or on the floor? Plenty.
The Arizona Legislature waited until the last moment to tackle two big issues– the Drought Contingency Plan (DCP) and tax conformity. We voted on both of these on January 31, 2019. The DCP, which was negotiated in advance, cleared the Legislature with 100% voting for passage. In contrast, the tax conformity vote sparked much drama and debate. Legislative Republicans dug in their heels over revenue-neutral tax conformity and insisted on a tax cut to benefit the richest Arizonans, while Governor Doug Ducey and the Democrats argued for fiscal responsibility and full tax conformity.
In the end, 100% of Republican Legislators bucked the governor’s wishes and passed a $150-200 tax cut. Ducey promptly vetoed SB1143 the next day and blasted Legislators on Twitter. Now we are at a standstill, due to infighting in the Republican Party. What side will win? Ideology or fiscal responsibility?
The House Ways and Means Committee passed HB2522 today. This is the revenue-neutral tax conformity bill, which would give the richest Arizonans a tax cut.
The Democrats stood strong and said that we should not give a tax cut when there are so many needs in our country. Also we must look at investment for the future rather than giving away money today. Our rainy day fund is underfunded. If Wall Street crashes the economy again, Arizona will face more devastating cuts, when we haven’t recovered fully from the last cuts.
This bill and the mirror bill SB 1143 need a 2/3 majority due to the emergency enactment clause, since we waited until the last minute to act on tax conformity. It will be difficult to get these out of the Senate or the House. Democrats need to stand strong on this.
Tax conformity with the Trump tax plan which was passed by Congress in December 2017 has been loping along in the Arizona Legislature … until today. This morning, the former Speaker and current Senator JD Mesnard did a presentation on what he wants us to pass for tax conformity. He has been quoted in the newspaper as saying that he wants tax conformity to be “revenue neutral”.
If Arizona decides to do full tax conformity, as Governor Ducey has suggested, Arizona will gain an estimated $150-$200 million per year extra for the general fund. If we do revenue neutral tax conformity as Mesnard has suggested, we will throw that extra $150-200 million revenue out the window by offering tax cuts along with tax conformity.
The December 2017 Trump tax plan raised the standard deduction and eliminated some itemized deductions. If you make less than a six-figure salary and you don’t itemize your taxes, you will be better off with tax conformity.
In order to ram these bills through the committees, the Senate Finance Committee and the House Ways and Means Committee have been rescheduled for Monday, January 28 at 10 AM. This is not the regular meeting time. We are required to vote on HB2522 and SB1143 simultaneously.
These bills were placed on agendas late today. If you are on Request to Speak (RTS), you have until Monday morning to voice your opinion. If you believe that Arizona should say “NO!” to more tax cuts and should use the money to cover state needs (or prop up the rainy day fund in the event of a Wall Street downturn), you want clean tax conformity— NOT revenue-neutral tax conformity as HB2522 and SB1143 propose. All hands on deck.
#RedForEd lifted the veil from our eyes and put the issue of corporate tax giveaways front and center in the fight to restore public education funding in Arizona.
As many of you are aware, the Arizona Legislature is giving away more than $13 billion in taxes every year and using only $10 billion to run the state. It is not sound fiscal policy to use accounting gimmicks and 50 fund transfers to “balance” the budget. It is no surprise that the state owes K-12 education around $1 billion. Thanks to scheduled corporate tax cuts passed by the Tea Party*, beginning in 2011, Arizona’s corporations got to keep an extra $1 billion in 2017. These corporate tax cuts continue through 2019, even though we can’t afford them.
As a result of the anger and frustration that many Tucsonans feel about the Arizona Legislature’s performance, the Stop Thief! Let’s Restore Fair Taxes Community Forum drew a standing room only crowd of diverse participants. The event was hosted by the Pima Area Labor Federation (PALF) and Progressive Democrats of America (PDA Tucson), with support from many other unions and community groups.
The star of the tax forum was the 20-ft banner listing 195 of Arizona’s 334 tax giveaways. Arizona is giving away $13+ billion is taxes each year and using only $10 billion to run the state. It is not sound fiscal policy when you use accounting gimmicks and 50 fund transfers to “balance” the budget.
Heart-felt testimonies from current high school students, who explained how school budget cuts have impacted their lives and their schools, opened the forum.
LD9 Rep. Randy Friese gave a detailed presentation on tax revenue and how it has been siphoned off by special interest groups and corporate tax cuts for decades. (Video after the jump.)
My talk focused on specific tax giveaway votes in the 53rd Legislature. focused specific tax giveaway bills and the drama that swirled around the bills that passed and the ones that failed. (Video after the jump.) Excluding any votes related to budget appropriations, all of the tax giveaway votes in the 53rd Legislature were bipartisan— with Democrats and Republicans on both sides.
The Legislature’s mindset on tax giveaways shifted from January 2017– when two Progressive Democrats made a pact to vote against every tax giveaway until the schools were fully funded– to budget night in May 2018. The Progressive viewpoint was: If the state “can’t afford” to fully fund K-12 public education (due to self-imposed austerity), then we “can’t afford” to give away or excuse any more taxes until the schools are on stable footing and fully funded. Thanks to the #RedForEd movement, on budget night 2018, hundreds of teachers, parents, and supporters filled the House gallery and the Capitol lawn and demanded that public education take priority over corporate tax cuts.
As I mentioned in my talk, a thorough tax giveaway review bill and several tax reform or repeal bills were proposed in the Legislature in 2018. Unfortunately, due to the gamesmanship at the Capitol, these bills were not heard because they were proposed by Democrats: Senator Steve Farley and Reps. Mark Cardenas, Randy Friese, and Pamela Powers Hannley.
It’s time to review all of the tax cuts, tax exemptions, tax credits, tax subtractions, and other tax loopholes. Some of these tax giveaways benefit narrow interests– to the detriment of the general fund and the general public. We must determine which tax exemptions benefit the people of Arizona (like the TPT exemptions for food and prescription drugs); which ones benefit special interest groups (like gold bullion enthusiasts); which ones benefit individual corporations (like the infamous four-inch pipe); which ones we are effective and affordable; and how we can spark economic development without breaking our budget and starving all of our educational institutions, as we are now.
Several people told me that they felt hopeful after my talk because so many costly tax giveaways were stopped on a bipartisan vote. If fact, all of the tax giveaway votes were bipartisan— with Democrats and Republicans on both sides. This is why it is important to ask every candidate in the 2018 election what their stance is on tax giveaways, the #RedForEd movement, the Invest In Ed Citizens Initiative (to secure long-term funding for K-12), and the Outlaw Dirty Money Citizens Initiative. Will these candidates fight for the people or will they “take the money and run”?
