Business interests celebrating the new, larger Republican majority at the Legislature may end up having some heartburn over who the senators chose as their leader.
On one hand, Russell Pearce said he is committed to lower taxes and less regulation.
But in a wide-ranging interview on business issues with Capitol Media Services, Pearce, who will become Senate president, said he remains an adamant foe of laws that create special tax breaks for companies based either on where they locate or the type of business they run.
"I don't like government picking winners and losers," the Mesa Republican said. "I think it's immoral when you give government that kind of power."
Those breaks, though, are central to what economic development groups say is essential to luring new firms to Arizona. And Glenn Hamer, president of the Arizona Chamber of Commerce and Industry, said they will remain necessary even if Pearce is successful in driving down overall tax rates.
"I'm a believer in lowering the tax base evenly and fairly for everybody," Pearce said. He said there is an obligation to treat all business the same.
From his perspective, that means lowering the overall tax rate. He has several in mind.
One is what is called the business "personal property tax."
In Arizona, both business and residential property owners pay annual tax on the value of their land and buildings. But businesses also pay the levy based on the value of all of their equipment, from major presses to computers and file cabinets.
And while the tax on any piece of equipment decreases each year with depreciation, it never goes away: As long as the equipment is in use, it is considered taxable.
Pearce finds the system unfair.
"You pay a tax when you buy a piece of equipment," he said. "But then we tax you for owning the equipment?"
He also would like a flat personal income tax.
Hamer said his organization agrees with Pearce's basic assumption.
"We need lower and more competitive corporate income tax rates, we need lower and more competitive business property tax rates," he said. But Hamer said that's not enough.
"The reality is that, for a number of these industries, to close the deal ... you need something more," he said. Hamer said that is particularly important for Arizona to lure manufacturing operations.
"There are a lot of places these companies can go, not just domestically but internationally," Hamer said. "You do need these other tools."
One of those tools involves foreign trade zones.
In Arizona, most commercial businesses are assessed for tax purposes at 20 percent of their value; residential property, by contrast, is assessed at 10 percent.
But state lawmakers agreed to create special zones for companies that qualify under federal law as importers or exporters, levying a 5 percent assessment ratio on property in those zones.
Enterprise zones, in areas of high poverty or unemployment, have not only property tax breaks but also tax credits for creating new jobs.
And some companies qualify for special tax credits for research and development.
"All of those tools are important," Hamer said. He said even conservative states like Texas have special tax breaks to lure companies.
Hamer said if there is any proof that the special tax breaks are needed, that was provided last month when Intel agreed to expand operations in Arizona.
"The fact is that for capital-intensive businesses like Intel, it is not a good comparison to take an Intel factory with the investment that's required to put those in place and treat it the same for property-tax purposes as an office building," said Intel lobbyist Jason Bagley. He said the Arizona property tax system that applies to all other kinds of businesses "puts those businesses like Intel at a tremendous disadvantage."
Pearce said he has heard all the arguments about why special tax breaks are necessary, especially to attract manufacturing firms which, generally speaking, have higher wages than service industry jobs. And he did not dispute that, in some cases, the breaks work.
"But at what cost?" he asked. Pearce said for everyone who pays less, someone else pays more.
"We have groups that are ‘profits above all else,'" he said. "As long as they get theirs, they don't care about the rest of the world."
Pearce said it's fine for Arizona to want good-paying jobs.
"But if you lower the regulatory and the tax burden, they'll come," he said. In fact, Pearce said his well-known efforts to stem illegal immigration fit into that.
"When you have safe neighborhoods, they're going to come," he said.
Hamer, however, said the experience in Texas shows that more than just low overall taxes are necessary.
"The fact is, there is some specialized activity that goes on to lure the more mobile, export-oriented technology and manufacturing companies," he said.
Pearce and the business community - and the state chamber in particular - also part ways on that immigration issue.
It was Pearce who pushed through the law which allows state judges to suspend or revoke the business licenses of firms found guilty of knowingly hiring undocumented workers. Both the state and national chambers, and their allies, sued to overturn that law, with the case before the U.S. Supreme Court next month.
Pearce has no love for the foes.
"The U.S. Chamber of Commerce is ‘profits over patriotism,'" he said.
"These are groups who think, while we've got a 26-year high on unemployment, they think it's necessary for them to hire illegal, cheap labor," Pearce said. "Shame on them!"
He said his stance fits into his philosophy about government not picking winners and losers. Pearce said allowing companies to flout existing federal laws against hiring undocumented workers gives them an advantage over their competitors who hire legal residents.
The legal position of the business groups is not that they should be able to hire undocumented workers but that the state is illegally intruding into the authority of the federal government to regulate immigration. Pearce and defenders of the law counter that federal immigration statutes specifically give states authority over licensing.
Rich posted at 9:09 am on Sat, Nov 13, 2010.
Capitalism works, until it overproduces, then there is too much stuff and too few consumers. Socialism works until there are too many consumers and too little stuff. (Trying to dumb it down for an Arizona audience). Let's say you have a bookstore. Education becomes a priority for you, because you need not only reading skills, but an appreciation of literature as an art form within your customer pool to be successful. So you need to create a tax balance that allows you a profit but doesn't shortchange the societal expenditures that provide it. An asphalt contractor needs different services from the government to prosper, and that includes maintenance of infrastructure. When you turn around and usurp functions of non-profit areas like charity and religion, such as Early Childhood development, health care, you wobble the system and a collapse is inevitable. When you go over and above the basic societal contributions for businesses selectively, as in subsidies, you wobble the system and collapse is inevitable. Businesses do not pay taxes, they collect them. Unless the business loses money, all the tax expense is paid by it's customers. When you tax a business, the consumer pays that tax when they buy from the business. The secret, like most things, is in the balance. Collect too much, do too much collapses the system as fast as collect too little, do too little, The problem here is that we don't choose our political leaders by their ability to find and maintain the balance we need for our prosperity but rather by nutball ideologies on both sides, which leaves us with arrogant, egotistical incompetents, who, if they do anything right, do it by accident.
miraclegro posted at 9:31 am on Sat, Nov 13, 2010.
Sen. Pearce never met a lobbyist he didn't like. Look at his new found coziness with police unions and their lobbyists. The senator hated unions and now he calls them one of his biggest supporters. Pearce is just like any other politician, he'll do what he has to do to remain in office, even if it means sleeping with dogs and getting fleas. When the big money lobbyists come calling and needing favors for the businesses that need tax breaks and preferential treatment Pearce will pick the winners knowing the businesses he helps will help him win when he runs for re-election. Or for governor in 2014.
Dale Whiting posted at 1:02 pm on Sat, Nov 13, 2010.
Well put Rich. Once again, you've hit the nail squarely on the head!
Miraclegro, nice to begin to make your aquaintance. I do not know that much about Russell Pearce other than what he has done on SB1070. And that was enough to tell me he is a looser of a person but a real winner as a politician. And your comments regarding lobbyists would apply to most all with Pearce's same background. He would not be making politics his career if he was not well connected. Russell appears to have been educated by the very best lobbyists money can buy.
What ever happened to the part time politicians envisioned by our founding fathers? I include on my list Jay Tibshraney who just left the State Legislature for a second tour as Chandler Mayor. Glad to see Jay is coming back. I also include Harry Mitchell who served us as a school teacher, then in Tempe City government, then in Washington. Tempe was not smart enough to keep Harry on.
Now, Mesa residents, to speak to Russell's next crazy idea. First it was SB 1070, then rewriting the 14th Amendment. Now its business tax incentives, "picking winners over loosers" as he puts it.
Russell, you say it's "immoral to give government the power to pick winners over loosers!" Intel is a winnner. You are a looser. That is an easy choice!
Russell, to add to what Rich has said, understand that we here in Chandler compete with such other states as Oregon and such overseas countries like Israel and India in attracting such notables as Intel to stay put. At one time 30 years ago, we were competing with Phoenix. At that time Intel had a north Phoenix campus. We here in Chandler won that competition against Phoenix! All it takes to pick winners over loosers is foresight. And we here in Chandler have foresight!
Now we here in Arizona are struggling to compete in the Solar Industry! Yes Arizona is falling behind. We have next to no solar cell manufacturing facilities. California is way out in front. Even Germany's First Solar makes most of its goods in the midwest. Why? Tax incentives. The US Federal Congress slept on investment tax credits for the Solar Industry while the likes of Germany pressed forward. First Solar is a German company doing business in the good old USA. Russell you are all wet!!!!!!!!
What does it take to compete? Those extra special tax incentives which you appear to wish to kill on grounds of their being immoral. You've got to be kiddins us, right? Why should the municipality of Chandler [and where competition is either interstate or international] the County and the State enter this competition? Well, ask the experts. Business makes our economy run. Tax breaks are necessary to attract that Business. This economic theory is well founded. It ain't like Reaganomics, full of seemingly good ideas but intellectually bankrupt! And we need to limit those incentives to the industries that have a real future!
So Russell, don't dissappoint us again. SB 1070 was quite enough damage for one political career! Fool us once, shame on you. Fool us twice, shame on us. Mess up again and it's out you go.
Mesa residents, are you listening? Russell Pearce is your doing not us residents of Chandler! Turn him loose on business taxation and you can say good bye to all that lucrative industry at Falcon Field in East Mesa! Mesa residents, you all were just put on notice!
Dale Whiting
Treasurer, Chandler Industrial Development Authority
Speaking individually and not in any representative capacity[beam]
Rich posted at 2:03 pm on Sat, Nov 13, 2010.
Just an idea. Tax people eighty cents a day for not smoking. We can tax one lifestyle, why not tax another? That would be fair, equitable, and provide equal protection and equitable distribution of the burden of taxation. Make people submit the tax coupons off their cigs, stogies, etc. and pay up eighty cents for every one they are short of 365, put it on the state income tax form. And, this is the cool part, non-smokers are in the majority, you get more money! No deficit, a ton of really neat programs you can keep. And since you've already established that it is perfectly alright to pile the taxes on a life style choice, just pick the right lifestyle. I mean not smoking is supposed to have all these benefits smokers don't get, so you're not asking that much, people are still coming out ahead. I mean talk about a win - win.
forkedlift1 posted at 1:32 pm on Sun, Nov 14, 2010.
It was refreshing to read these thought provoking intelligent comments by intelligent and informed people on this article. Unfortunately, the 5th comment, as I recall also by "miraclegro," was deleted some time late this morning. Since Russell Pearce's stated philosophy is quoted throughout this article, miraclegro's comment was relevant: a brief 1999 Republic news article reporting that Pearce had been fired as director of the state Dept. of Motor Vehicles and the reasons he was fired, caught in the act of criminal wrongdoing in his official capacity as director.
The comment's deletion points to a powerful politician who greatly fears exposure of truth concerning him.
I noticed also that ALL of my recent posts, whether or not they concerned Pearce or his beliefs. have also been deleted.
The webmaster of this site must be very busy.
Worth reading is E.J. Montini's column in today's Arizona Republic. "Paid to put in client's 2 cents. Blog hecklers getting paid to comment on posts." It explains the inanity of so much of the "commentary" on this site because the site is so polluted and contaminated with these paid hecklers. Not exactly a career path for some who receive 5 cents per post and use 10 different fake identities, but their "side job" keeps them in beer money.
CooperG posted at 8:50 pm on Sun, Nov 14, 2010.
Even though he lost, I liked what Andrew Sherwood was saying about job and economic development. He said "when it comes to industries like solar energy, our state government isn't "picking winners or losers," it's promoting our own unique competitive advantage. Maybe if Pearce spent some time working in the private sector a while, he'd know that competitive advantage can mean everything to winning in a global marketplace."
He gets it way more than this 10-year incumbent does. Too bad he lost because now we're stuck with a business-repellant Senator who can't recognize advantage even when it is shown to him.