Gov. Jan Brewer signed a package of tax cuts into law on Friday that will reduce state revenues by more than $100 million by 2019.
Brewer said the provisions, taken together, should help stimulate the state economy. And that, the governor said, will create more jobs which, in turn, should mean more tax dollars.
The cuts approved by the Republican-controlled Legislature, will not kick in before 2014, a concession to Brewer’s insistence that lawmakers not cut business taxes while individual Arizonans are paying higher sales taxes. That temporary one-cent sales tax surcharge, approved by voters in 2010, self-destructs slightly more than a year from now.
They also come on top of a $538 million package of business tax reductions approved last session. Those cuts, also being phased in over several years, will cut corporate income taxes by nearly 30 percent and business property taxes by 10 percent.
In a speech to the Arizona Manufacturers Council where she signed this year’s measure, Brewer defended the changes in tax policy.
“We all know that high corporate taxes are job killers,” the governor said. “They discourage expansion.”
This year’s package creates new income tax credits for companies that build or expand manufacturing plants, research facilities or corporate headquarters in Arizona. An analysis of the impact of that by the Joint Legislative Budget Committee puts the price tag on that by 2019 at $20 million.
Another provision says companies that incur operating losses can use those to offset future profits — and avoid future taxes — for up to 20 years. Now that carry-forward is good for just five years.
That will cut revenues by more than $12 million.
But the biggest — and most controversial — part of the package is reducing the individual income tax rate on long-term capital gains by 25 percent. The cost of that approaches $70 million by 2019.
During legislative debate, Sen. Paula Aboud, D-Tucson, said that levy is imposed when individuals sell things like stocks and real estate. She questioned how reducing the tax on what people pay the state when they sell those items will stimulate the Arizona economy.
And there is no requirement that the funds be reinvested in any Arizona firm.
Brewer sidestepped questions about the stimulus effect of a capital gains tax cut, saying it is just one piece of the package.
“It works all collectively together,” the governor said.
“The bottom line is that we’ve got states that surround us, like Texas and Nevada, they don’t even have income tax,” Brewer continued, putting Arizona at a competitive disadvantage. “So if we bring all of this all together, it spurs the economy. It’s a package.”
Sen. Steve Yarbrough, R-Chandler, one of the architects of the plan, acknowledged the change will mainly benefit those who have money to invest. But he said that does not make it a bad thing.
“If I were a reasonably well-to-do potential investor and I sold stock and I paid less taxes, then I can invest in my business. I can invest in all sorts of other things that will help generate jobs and improve the economy,” Yarbrough said.
He said most Arizonans don’t have the resources to create jobs.
“And so, consequently, it’s not going to impact us very much,” Yarbrough continued. “But for the folks who are the job creators, the entrepreneurs, you bet.”
House Speaker Andy Tobin said there is evidence, at least on the national level, that cutting the capital gains tax rate does work to create jobs. He cited the bill signed in 1997 by then-President Bill Clinton, a Democrat, to lower the rate, a decade after Republican Ronald Reagan agreed to have capital gains taxed at the same rate as regular income.
“When he decided to reduce the capital gains after he saw what happened to Ronald Reagan, we did pretty good,” Tobin said. “We ended up with more money in the coffers.”
And he echoed Brewer’s belief that the change in law will bring business to Arizona.
“This is just a good statement that tells the world that Arizona continues to be open for business,” Tobin said.
Glenn Hamer, president of the Arizona Chamber of Commerce and Industry, said this is not a partisan issue. He said New Mexico, where Democrats generally hold political sway, also grants a more favorable tax rate for capital gains than for regular income.
In_God_We_Trust posted at 4:14 pm on Sun, May 13, 2012.
Thank God we have a republican led government that cares more about getting people (US Citizens) back to work and not a socialist one like California has.
Rational Human posted at 12:44 pm on Sun, May 13, 2012.
Would anyone like to estimate how much Mexifornia pays out in social programs and other costs for the millions of illegal aliens they harbor? Mexifornia's nearly 3 million illegal immigrants cost taxpayers nearly $9 billion each year. Educating the children of illegal immigrants is the largest cost, estimated at $7.7 billion each year, according to the report. Medical care for illegal immigrants and incarceration of those who have committed crimes are the next two largest expenses. The $9 billion figure does not include other expenses that are difficult to measure, such as special English instruction, school lunch programs, and welfare benefits for American workers displaced by illegal immigrant workers. Will you ever hear a Mexifornia politician state the obvious? Never because that, of course, would be racist.
Rational Human posted at 9:00 am on Sun, May 13, 2012.
California's economy is the eighth largest economy in the world.
The state budget shortfall in California has increased dramatically in the last six months, forcing state officials to assemble a series of new spending cuts that are likely to mean further reductions to schools, health care and other social programs already battered by nearly five years of budget retrenchment, state officials announced on Saturday.
Gov. Jerry Brown, disclosing the development in a video posted on YouTube, said that California’s shortfall was now projected to be $16 billion, up from $9.2 billion in January. Mr. Brown said that he would propose a revised budget on Monday to deal with it.
“We are now facing a $16 billion hole, not the $9 billion we thought in January,” Mr. Brown said. “This means we will have to go much further and make cuts far greater than I asked for at the beginning of the year.”
Aren't you glad you don't live in the newest failed socialist experiment. downtownrodent why don't you go live with the rest of the vermin in the Peoples Republic of Mexifornia.
Here in Arizona we care that all our citizens are employed and deport thieving illegal aliens. As the aliens leave Arizona for Mexifornia, Mexifornia business will be coming here for the better fiscal environment.
k33j88 posted at 4:54 am on Sun, May 13, 2012.
Thank you slabside for bringing a little bit of sunshine into my life. Your no-nonsense approach to real-life issues is a breath of fresh air.
Slabside posted at 6:35 pm on Sat, May 12, 2012.
DING DING DING! And we have a winner! Today's "Progressive Liberal Racist Jacka_s_s Award" goes to downtownresident for interjecting racism when he has no valid argument.
downtownresident posted at 5:31 pm on Sat, May 12, 2012.
k3t3j88,
Poor child. None of the tax giveaways to the rich that the "public servants" have passed so far have brought down unemployment, or helped the economy.
It has helped the hedge funds and unethical traders and politicians, Fannie and Freddie to make billions.
The "socialist dictator" is black. Get over it!
k33j88 posted at 8:07 am on Sat, May 12, 2012.
Dear downtownresident: You can always move to another "downtown" where all your needs are met by your "socialist dictator" that you voted-in. Detroit MI, comes to mind.
k33j88 posted at 8:02 am on Sat, May 12, 2012.
Three cheers and a job well-done, Gov. Brewer. This will encourage job creation by those capable of offering "livable wages". It is a proven fact: Lower taxes spurs growth and increases the States coffers for a healthier economy and expanded investment.
chuckles3 posted at 6:43 am on Sat, May 12, 2012.
Gee, its good to see an article where the writer doesn't inject his opinion into a thoughtful well written article reporting facts. There is no way I could tell whether the writer thinks tax cuts are good for state revenue because they encourage growth and increase receipts or if they reduce state revenue and have no effect on jobs growth. No way at all.
downtownresident posted at 6:38 am on Sat, May 12, 2012.
A $700,000,000.00 give away to the rich, on the backs of, you guessed it, THE VOTERS. The poor slobs who don't have enough money to buy influence because they have to spend theirs on food.
I'm ashamed to say I live in this state with idiots and crooks in control. A governor who needs a brain and a sheriff who is a fat bigot who is spending millions of our dollars fighting truth and justice.
They all belong in JAIL!!!!!!!!!!