BREWER ECONOMIC PLAN UNVEILED; BIZ TAX CUTS ON TOP

posted by Michael Chihak

Arizona Gov. Jan Brewer announced her economic development plan today at the State Capitol, leading as expected with a package of business tax cuts.

The plan also calls for the legal trappings to change Arizona's Commerce Department to a private-public Commerce Authority to boost economic development and a "deal-closing" fund to lure businesses to the state.

A special legislative session will be called to allow the Legislature to focus on the plan and get it passed quickly.

The business tax cuts will include a reduction in the state corporate income tax by about 29 percent, elimination of the state tax on goods manufactured in Arizona but sold elsewhere, reductions in real estate and personal property tax rates for businesses and other tax-reducing steps. All would be implemented gradually beginning in about two years, taking full effect by 2017.

The Joint Legislative Budget Committee has estimated that a similar business tax-cut plan in the Senate would save businesses about $475 million a year when fully implemented.

Arizona Week will look at details of the plan throughout the week and on Friday evening's program. We are seeking interviews with the governor, with Arizona Commerce Authority Don Cardon and with an economist for analysis of the plan.

EDUCATIONAL QUALITY TRUMPS TAX, REGULATORY BREAKS

posted by Michael Chihak

The package of tax cuts working its way through the Arizona Legislature is important for business recruitment and retention, but no more so than maintaining a high quality educational system, says the head of Arizona's leading business organization.

Glenn Hamer, president and CEO of the Arizona Chamber of Commerce and Industry, said in an interview today in Phoenix that executives of a lot of companies looking at Arizona will say that they like low taxes and little regulation, but that if the higher education system isn't top notch, "we'll send you a postcard from Alabama."

Hamer said Gov. Jan Brewer's economic development package, expected to be revealed as early as next week, will include important business tax cuts. He said just as important will be its enhancement of a new economic development arm, the Arizona Commerce Authority.

There's no way to tell how many jobs can be created as a result of attracting businesses to the state with the tax cuts, Hamer said, but he said it should make up for the 300,000 jobs lost in the recession over the last threee years.

He called elements of the tax-cut package "a game changer for us" in terms of attracting businesses.

FRIDAY'S PROGRAM: BUSINESS, ECONOMY

posted by Michael Chihak

Glenn Hamer, president and ceo of the Arizona Chamber of Commerce and Industry, will discuss the state's economy and incentives for getting it moving on Arizona Week Friday.

The program will focus on state efforts at economic development, including a package of business tax cuts and Gov. Jan Brewer's soon-to-be-announced economic development package. Her spokesman said today that package could be unveiled as early as Monday.

After Hamer is interviewed, economist Jim Rounds will appear to offer analysis of state economic development efforts. Rounds is senior vice president and senior economit at Elliott D. Pollack & Co., an economic and real estate consulting firm in Scottsdale.

DO TAX CUTS=JOBS? YES, MAYBE, NO

posted by Michael Chihak

Republican leaders in the Arizona Legislature say their proposals to cut business taxes will make the state more competitive and encourage job creation.

But will they? Depends on whom one talks to and what information one considers. Hence, the answer is definitive: yes, maybe, no.

First, lower taxes are a good thing, in general, and they certainly are part of the mix of what businesses consider when choosing location and making expansion and hiring decisions.

But they are not the be all to end all, according to numerous economists. Let's quote just one, Dennis Hoffman, director of the L. William Seidman Research Institute at Arizona State University. In a report he and colleague Tom Rex wrote in November 2008, they said:

"Nearly any position on the relationship between taxes and economic performance is supported in the published literature. However, the bulk of the modern literature indicates that taxes have only a small effect on economic growth."

The report goes on to say: "Generally, tax burdens must be far out of line with competitor regions before much of an effect on the economy can be measured. ... In general, tax policy is an inefficient way to stimulate the economy. Investment in infrastructure and education has been shown to have a greater effect on economic growth."

By anecdote, one can surmise that tax cuts have had little effect on national job growth. It has been widely reported that the Bush administration tax cuts of 2001 and 2003 were followed by creation of far fewer jobs than the administration projected. Additionally, those tax cuts -- and more -- remain in effect today, and job creation can be described as lagging at best, anemic at worst.

Discussion and study of the issue is important as the Legislature stands ready to approve the tax cuts, and Gov. Jan Brewer is poised, perhaps, to call a special legislative session to consider a comprehensive economic development package.

AZ BUSINESS TAX CUTS: WHAT'S THE ROI?

posted by Michael Chihak

Arizona Week is exploring for Friday's program the state Legislature's package of business tax cuts, working their way through committees and to the floors of both chambers soon.

A series of bills, with slight differences in the House and the Senate, would reduce what multi-state corporations must pay in states taxes on their sales, reduce the corporate income tax rate and reduce property tax rates on business real estate and business equipment. The reductions would be phased in over the next several years.

The idea is to create a business-friendly atmosphere that will attract new businesses to the state and more jobs. It's a key part of Gov. Jan Brewer's larger economic development strategy, to be led by the state's newly formed Commerce Authority.

The Joint Legislative Budget Committee analyzed the the bills and estimated that at full implemented, six years from now, they would have reduced corporate taxes paid to Arizona by $475 million total. That's 5.5 percent of the current state budget.

The committee has not released estimates of numbers of jobs that would be created -- and thus increased state revenues from them and more business in Arizona -- by implementing the tax cuts.

We will detail the tax cuts package, what it means for businesses and seek expertise for Friday's program to show what kind of an ROI -- return on investment -- there would be to the state for these cuts.

AZ GOVERNOR SEEKS MEETING WITH FED HEALTH SECRETARY

posted by Michael Chihak

Gov. Jan Brewer wrote to U.S. Health and Human Services Secretary Kathleen Sebelius on Thursday asking for a meeting to discuss her requested waiver for Arizona regarding its Medicaid standards.

It's the second letter Brewer has sent to Sebelius in a week, the first one being the actual request for the waiver.

This time, the governor said she was encouraged that Sebelius has told the nation's governors that she wants to work with them to create a sustainable Medicaid system. At the same time, Brewer expressed worry that Sebelius might be thinking that she doesn't have the authority to waive a state's Medicaid benefits requirements.

" ... you appear uncertain whether you have authority to waive maintenance of effort requirements under the law," Brewer wrote in Thursday's letter. "I believe strongly that you do."

Brewer has asked the federal government to waive Arizona's voter-imposed benefit for health care for the poor, a move that would save the state $541.5 million and be the biggest step toward a balanced budget for 2011-12.

Such a move, though, would knock 280,000 poor Arizonans off of state-supported health care and would cause the state to lose $1 billion in federal matching money. That loss would cost the state 46,700 jobs, mostly in the private sector, an Arizona State University economist has estimated.