Arizona GOP lawmakers propose sweeping tax cuts

AP News
Posted: Jan 05, 2010 4:52 PM

Arizona House Republicans on Tuesday proposed a sweeping package of tax cuts aimed at helping businesses, with Speaker Kirk Adams saying the incentives are needed to spur economic development and add high-paying jobs in the state.

The package proposed for consideration in the legislative session that starts next Monday includes both corporate and individual income tax cuts and decreases in property taxes paid by businesses.

"Arizona is not as competitive as it needs to be with job retention and job growth," Adams said.

The Mesa Republican was flanked by a half-dozen fellow GOP representatives during a news conference held at the Boeing Co. helicopter plant in Adams' legislative district.

Some of the cuts would apply to all taxpayers, while others would go only to businesses that add jobs or participate in a revitalized work-training program. The overall cuts would be phased in over four or five years starting in 2012.

Arizona faces an estimated budget shortfall of at least $1.4 billion in the current fiscal year now half over, and a $3 billion deficit is projected for the fiscal year beginning July 1.

However, the tax-relief and economic development proposals would not worsen the state's current budget trouble because phase-ins of overall reductions would not start for several years and other program's funding would come from diverting income-tax withholding paid on newly created jobs, Adams said.

Adams said House Republicans are working on a separate plan to tackle the deficit and expect to release that at an upcoming committee hearing. He declined to discuss its contents Tuesday.

Boeing is among the so-called "base industry" employers who are a major focus of several of the initiatives because they pay high wages and boost the overall economy, partly through work spun off to small businesses, Adams said.

Adams said Arizona's economy is too reliant on growth industries such as construction and needs to be diversified. "If we don't ... we're going to continue to have the boom and bust economy," he said.

Rep. Chad Campbell, the House Democratic minority's point man on tax policy, said the Republicans' proposal would help big business at the expense of middle-class taxpayers.

"It looks like corporate Arizona is getting a second Christmas. This is exactly what the state of Arizona doesn't need," he said.

Campbell and other Democrats have proposed applying the sales tax to more transactions and other steps to expand revenue to pay for current services facing cuts to balance the budget.

The House Republicans could find some common ground with Republican Gov. Jan Brewer. She has called for long-term tax relief for businesses and said Tuesday she plans to call for several business tax cuts in her State of the State address Monday.

The package's corporate income tax would reduce the current rate of nearly 7 percent to 4.5 percent over four years starting in 2012.

Arizona reduced its individual income tax by 10 percent in 2006 and 2007, and the new proposal would cut it by another 10 percent over four years starting in 2012. That reduction is needed to benefit small business owners who don't file corporate returns, Adams said.

The package would lower the assessment ratio for businesses' property taxes, a step that would require increasing the overall tax rate to maintain current revenue. That in turn would increased burden on residential property.

That's a trade-off worth making, especially because the package also includes an overall property tax reduction, Adams said. "Arizonans get the importance of job growth and job creation," he said.