Government

Ducey pitches business leaders for help with Arizona budget, $1.9B tax cut

Posted 6/17/21

PHOENIX — Unable to advance his proposed $1.9 billion permanent tax cut at the Capitol, Gov. Doug Ducey is now going public — or at least to business interests — in a bid to build …

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Government

Ducey pitches business leaders for help with Arizona budget, $1.9B tax cut

Posted

PHOENIX — Unable to advance his proposed $1.9 billion permanent tax cut at the Capitol, Gov. Doug Ducey is now going public — or at least to business interests — in a bid to build public pressure.

Some of the numbers he is using in that sales pitch, however, are not quite accurate.

The governor on Thursday created a website where individuals can sign up to show support. There already were a handful of names on the site as of early afternoon.

But Ducey also is taking his case directly to business owners. That included a telephone "town hall" Thursday afternoon where the governor, along with the two main legislative proponents of the tax-cut proposal, sought to make their case to, based on who was asking questions, were people who already in support.

It could be the business owners that have the most to gain.

First, the proposal collapses all the state's tax brackets into a single rate of 2.5%. That isn't much of a break for couples earning up to $53,000 who currently are in the 2.59% tax bracket.

But earnings above $318,000 a year, now taxed at 4.5%, would be subject to the 2.5% rate.

An even bigger break awaits those at the very top, meaning couples earning more than $500,000 a year.

Proposition 208, approved by voters in November, imposes a 3.5% surcharge on earnings above that point.

Lawmakers are legally unable to repeal that initiative.
So instead they are proposing an absolute 4.5% cap on all income taxes, including the 3.5% surcharge. And that effectively reduces the balance of their income taxes to 1%.

Still, Ducey, during his town hall, touted the plan as "a tax cut for all Arizonans." And he said the plan would provide a tax cut for the average Arizonan at $300 a year.

But figures from the Joint Legislative Budget Committee show a wide disparity.

For example, for those earning between $20,000 and $25,000 a year, JLBC computes the average tax cut to be $8 a year.

In the $50,000 to $75,000 range, the relief would be $39 a year. And it accelerates from there.

For taxpayers with adjusted gross income of $200,000 to $500,000, taxes would drop by $3,202 a year on average.

And for those with taxable income of $1 million to $5 million, the difference would be more than $46,625, a 43% difference. That's because these people are in the category where, absent what Republicans are proposing, they would be paying an effective 8% tax rate on their earnings — the current 4.5% rate plus the 3.5% surcharge — on earnings above $500,000.

The governor said the state can afford the tax cuts.

"We could see up to a $4 billion surplus in fiscal year 2022," he said, meaning the current budget year.

Yet the governor's own website puts the ongoing surplus of $2 billion.

Even press aide C.J. Karamargin conceded that $4 billion figure is unrealistic.

He said that is based on what would happen not only without a tax cut but also without any growth in the budget, meaning no expansion of any programs that now exist.

And Karamargin said that also may include all the federal dollars Arizona has gotten from Washington in COVID relief. But those are one-time dollars and do not reflect ongoing available revenues.

Ducey also provided misinformation about the economic recovery.

"We actually have more people working in the state of Arizona than we did in February 2020," he told those on the call.

In fact, though, figures announced the same day by the state Office of Economic Opportunity peg total employment at slightly more than 2.9 million. By contrast, that same agency put the figures for February 2020 at close to 3 million.

And the agency said Arizona has gained back just 75% of the jobs lost since the beginning of thje recession.

Ducey was joined on the call by the two main proponents of the tax cut package: House Majority Leader Ben Toma, R-Peoria, and Sen. J.D. Mesnard, R-Chandler.

Among those on the call was Ed Ackerley, who owns a Tucson advertising firm. A supporter of the plan, he asked the governor what can be done to get the tax plan and the $12.8 billion budget that comes with it approved.

"Public input is really part of this process," the governor responded. "Whatever you can do to be vocal, to reach out to your legislator, to communicate, to organize so people understand what a good idea this is and give them the proper advocacy to make the right decision on this."

It isn't just the income tax cut, mostly benefiting the most the wealthy, that Ducey and the GOP legislators are promoting.

The plan also includes a cut in business property taxes.
Under current law, businesses are valued for tax purposes at 18% of their "full cash value,'' a figure that is supposed to roughly represent its true market value. The package being proposed would drop that over several steps to 17%.

But it contains language designed to ensure there is no loss to local governments and schools who are dependent on property taxes, with the state using its surplus to make up the difference.

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