Tax incentive policies scream for change

Posted on August 17, 2007 | Type: In the News
  • Twitter
  • Facebook
  • Email

Really, it's past time the issue of tax incentives for developers is resolved.

It would have been better if Arizona's municipalities had just understood the inadequacy of the state tax code and worked out reasonable arrangements to share revenues.

We shouldn't have had to go to court.

But that never happened. If cities thought they had an advantage, they would exploit it. They would not compromise.

Valley cities would fight over locating a big car dealer or a shopping mall within their own city limits, thus qualifying for the lion's share of sales tax revenues generated. Developers - no dopes - started playing cities off one another, baiting them into bidding wars by eyeing lands near the limits of Scottsdale and Phoenix, or Tempe, Chandler and Phoenix. Millions of tax dollars for police, fire and other services depended - literally - on which side of the street the business was located. The developers profited and tax rolls suffered as a result.

City officials, dependent on sales-tax revenues, cannot resist the temptation on their own. They paid people to sell us stuff. They've forked over hundreds of millions of dollars in tax giveaways. It's a stupid policy that screams for correction - as this newspaper has done for years.

We shouldn't have to go to court to stop this insanity.

Yes, it would have been better if Arizona's municipalities had just worked out shared-revenue agreements.

But they refused to do so.

And the cities and other interests blocked action at the Legislature.

And so, typically, we turn to the courts. A lawsuit might not be the ideal venue to fashion public policy, but in challenging the Phoenix $97.4 million subsidy to CityNorth, the Goldwater Institute is challenging the very constitutionality of the dubious practice.

On several counts: That it violates the gifts clause of the state Constitution, prohibiting any grant or subsidy to an individual, association or corporation. That these incentives grant special privileges and advantages to one group not shared by others. That is the argument made by plaintiffs, all small businesses in Phoenix.

The court will consider two key questions in the CityNorth case; One question: Does this project serve a public, as opposed to private, purpose? Secondly, does the tax rebate constitute a subsidy, or is there a quid pro quo, something of equal value that Phoenix gets in return?

As we have argued before - so many times before - the issue is not about bringing jobs, new industries or even higher payrolls to Arizona. That competition is real and dirty enough. But what the cities are doing is handing over money to businesses, retail businesses that would locate here anyway, so they can sell us stuff.

The incentives, the tax giveaways are not necessary. Developers just took advantage of the way we finance municipal government here, according to sales taxes generated within municipal boundaries.

So it doesn't matter to Wal-Mart or Costco in which city they locate, just so they're convenient to their customers. It matters only to the cities.

A revenue-sharing agreement based on a fair formula, calculating, population, distance and income, could be worked out. Phoenix City Manager Frank Fairbanks has outlined such a policy. But the cities refused.

And now we can only hope the courts, at the behest of the Goldwater Institute's Clint Bolick, can rectify, clarify and end this expensive and dubious policy.

Advanced Search

to Go >>

Recent Facebook Activity