Arizona is in a financial crisis, as Gov. Doug Ducey has told us time and again.
So why is it that he and the Legislature are rejecting tax revenue that rightfully belongs to a state government that could desperately use it to build roads and protect children?
Lobbyists and legislators, that’s why. When a narrow interest wants a tax exemption, it pays the lobbyists who work the legislators, and — voilá! — an exemption is born.
I’ve written about this before: Exemptions to the state sales tax passed over the years by the Legislature have cost us billions in accumulated unpaid taxes. The classic example is 4-inch pipe, which is not subject to sales tax, thereby benefiting Southwest Gas, while pipe of other diameters is taxable.
On Wednesday, Ducey twisted the story a bit, but the effect is the same. He vetoed a bill that would have exempted crop dusters and charter-tour aircraft from the state sales tax. Then he instructed the Arizona Department of Revenue not to enforce sales tax on those items from now forward, giving the Legislature time to fix problems with the bill.
Basically, Ducey wanted to approve the exemptions, but he doesn’t want them to be retroactive to 1998, as the bill stipulates, unless he knows how much that’s going to cost the state. It’s a worthy question — we do want to know how much this will cost before telling everyone who bought a charter tour aircraft or crop-duster back to 1998 that they can come in for a refund.
“This is great policy, but this retroactivity clause doesn’t have a fiscal impact report assigned to it,” Ducey’s general counsel, Mike Liburdi, told me Thursday.
While looking back is important, it’s just as worthwhile, if not more so, to look at our current exemptions and their impact going forward.
Of the two sales-tax exemptions in the bill, the one for charter tour aircraft is sketchiest. It’s intended to help out Papillon Airways, which operates helicopter tours of the Grand Canyon and was hit with an approximately $700,000 tax bill that it would prefer to avoid.
Who wouldn’t want to avoid paying those taxes?
So Papillon fought it in superior court and lost. The company then fought it in the Arizona Court of Appeals and lost on Jan. 29. Now it’s appealing to the Arizona Supreme Court.
At the same time, Papillon is fighting a similar battle in federal court over millions of dollars in federal taxes that it doesn’t want to pay.
The crop-duster exemption is more legitimate because it involves agricultural equipment that previously was considered exempt under state law, then later considered non-exempt. Rep. T.J. Shope of Coolidge authored the bill on behalf of a constituent who had bought crop dusters without paying sales tax in previous years.
Shope’s bill, at least, set a cap on refunds of the sales tax at $10,000, whereas the charter-tour portion of the bill didn’t.
Daniel Scarpinato, Ducey’s spokesman, put both bills in the context of Ducey’s pledge to reduce the tax burden on businesses.
“At the end of the day, the governor’s view on this is that the business community and the ag community have been operating under one set of rules for 17 years,” he said. “This change of policy amounts to a tax increase on them. It’s impactful, and the governor has stated over and over that he doesn’t want to raise taxes.”
I disagree with this interpretation, of course. What it looks like to me is a form of crony capitalism in which the rules are not applied equally to every company or business sector.
And the upshot is that the rest of the taxpayers will foot the bill for those who have the money or political pull to get their individual tax burden shrunk.
More renovations?
One thing that’s becoming evident about House Speaker David Gowan is that he seems to like the institution of the House and his influential position in it, perhaps more than he likes pursuing specific policy priorities.
Now that fondness is starting to bite him.
The Arizona Capitol Times’ Hank Stephenson revealed this week that Gowan is planning more renovation work on the House building. It could add up to $1 million on top of $375,000 Gowan spearheaded earlier this year, Stephenson reported.
The news troubled some House GOP members, including Tucson Rep. Chris Ackerley. He and 17 other House Republicans signed on to a letter asking that a bipartisan committee be formed to review any spending over $25,000.
“As Republicans, we support limited government and policies that support fiscal responsibility,” the letter said, noting the painful cuts the House had just made to the state budget.
It’s a challenge Gowan will have to manage carefully if he wants to retain his prized position.
CD2 dem seat cleared
Ron Barber‘s decision not to try to retake the Congressional District 2 seat from GOP Rep. Martha McSally has answered one big question for Democrats.
The next questions are which Democrats will get into the race, and what the district will look like come next year.
So far, only one candidate has formally taken any steps. State Rep. Bruce Wheeler has formed an exploratory committee to look into running. Other possible Democratic candidates include former state Rep. Dr. Matt Heinz and Farmers Investment Co. executive Nan Walden.
But the U.S. Supreme Court’s pending decision on whether to invalidate the Arizona Independent Redistricting Commission decisions could make a big difference in who runs.
In any case, they’ll face a formidable foe in McSally, who this week reported raising a whopping $589,426 in contributions during the first quarter.
