Business & Job Creation
Businesses need a friendly and fair business environment so they can compete, innovate, and create jobs. We’re keeping politicians from playing favorites by offering special deals and tax breaks to the favored few.
Do you have a love of fabric, furniture, and a talent for decorating? In a few states, unless you have a license, it’s tough luck if you want to start a decorating business. Most states actually have laws that limit the use of the title “interior designer.”
Let’s say you want to start a business. You scrape together some start-up capital. And let’s say you are able to eventually hire 15 people and are able to pay them above the median wage in your community.
Now let’s say a company moves in across the street and hires 15 workers on the same terms. The main difference is that they have more money to invest in their company right away than you did. There’s another big difference, too. They will get the benefit of a big tax cut that you won’t get.
While the Goldwater Institute's legal challenge to the CityNorth subsidy moves to the Court of Appeals, one issue remains before the trial court that upheld the subsidy.
Not content merely to demand $97.4 million of taxpayer money, the developers now are seeking hundreds of thousands more for their attorneys fees from the Goldwater Institute.
As the fiscal year winds down and the states $2 billion deficit still looms, lawmakers are understandably growing more skeptical about the proposed Eloy theme park bill. There are plenty of good reasons to be skeptical, such as the fact that it provides a private entity tax-exempt financing. Lawmakers can also simply look to the north at other skeptics.
The Superior Court decision upholding the massive subsidy Phoenix gave CityNorth is an exercise in legal sophistry.
Judge Robert Miles held that there were considerable public benefits from the building of the shopping center, and so there wasn't a violation of the state Constitution's gift clause.
There is not, however, a public purpose or benefits exception to the gift clause ban. It states that no Arizona government "shall ever give or loan its credit in the aid of, or make any donation or grant, by subsidy or otherwise, to any . . . corporation." Period.
Despite its abundance of sunshine, Arizona is home to relatively few solar companies. Concerned that other states are luring the solar industry through tax subsidies, some Arizona legislators are pushing to do the same.
Last week, the Arizona legislature killed an entrepreneurs dream. It passed a bill to create a regional attraction district, with taxing authority, exemptions from property and income taxes, and the ability to issue up to $750 million in government bonds to finance construction. Thus, government greased the skids for the Decades Music Theme Park, a rock music attraction that developers want to build near Eloy, a small town between Tucson and Phoenix.
Arizona's constitution prohibits corporate subsidies by outlawing any donation or grant, by subsidy or otherwise, to any individual, association or corporation. Despite this, last year the City of Phoenix awarded a $97.4 million incentive to Klutznick Company, the developers of the CityNorth mall in north Phoenix.
To stay within the bounds of the constitution and past Arizona Supreme Court decisions, the City has to prove it is buying a public good at an equal market value to the monetary incentive.
A few weeks ago, I pointed out that Arizona's economy has been disproportionately fueled by the construction industry. In 2006, the proportion of Arizona's total economic output from construction stood at 7.4 percent, 50 percent higher than the U.S. proportion of 4.8 percent. I attributed this to the relatively high commercial property taxes assessed at a rate twice as high as that of residential property.
Senate Republicans recently announced their intention to balance the state budget without increasing taxes, as suggested by the governor. That will require significant reductions in spending.
ASU economist and professor Dennis Hoffman recently argued that reducing state spending by $1 billion would "significantly worsen and lengthen the economic recession." He estimated that 20,000 workers, including 12,000 private employees, would lose their jobs.