NFIB Opposes SB 1041 as Bad Tax Policy, Likely to be Struck Down as Unconstitutional



The following letter was sent today by the National Federation of Independent Business (NFIB) to all members of the Arizona House of Representatives regarding major property tax legislation that has yet to receive the appropriate amount of attention in the press or from lawmakers.  NFIB joins the Arizona Tax Research Association, the Goldwater Institute, the Arizona Free Enterprise Club and Americans for Prosperity – Arizona in opposing this misguided legislation.  However, interests principally representing large, out-of-state-based businesses, have rallied to champion the bill including the Greater Phoenix Economic Council and Arizona Chamber of Commerce and Industry.  Click here to watch a ten-minute KAET-TV’s Horizon segment on SB 1041 featuring GPEC’s Barry Broome and NFIB’s Farrell Quinlan. 

Dear Representative:

The 7,500 Arizona small business members of the National Federation of Independent Business urge you to vote “NO” on SB 1041: Invest Arizona. This legislation clearly violates our long-held position against picking winners and losers in our tax code, threatens to undermine the property tax base in rural counties, shifts the property tax burden to homeowners and established businesses; and, perhaps most critically, creates a likely unconstitutional disparity between property taxpayers.

  • Winners vs. Losers: By definition, qualified businesses investing after enactment of SB 1041 will win a 75-percent-property-tax-forgiveness provision for ten years unlike the established businesses unlucky enough to have invested in Arizona before SB 1041’s enactment. Proponents blithely assert that established businesses may also take advantage of the 75-percent-property-tax-forgiveness provision if they meet SB 1041’s investment and jobs qualifiers—therefore, the Invest Arizona program doesn’t create a winners vs. losers situation. This line of thinking ignores the fact that established Arizona businesses have already made their principle investment in plant and property while taking a variety of defensive actions to survive the ongoing recession. Moreover, the vast majority of small businesses in Arizona didn’t make $5 million (or even $1 million) in capital investment in their enterprises while 88 percent of all Arizona businesses employ less than 25 workers. They are clearly losers under the Invest Arizona scheme.
  • Threatens Rural Tax Base: Many rural counties have relatively narrow property tax bases due to high levels of publicly-owned property. Any undermining of the property tax base, especially in the revenue-rich Class 1 commercial and industrial category, puts rural county, municipal and school district budgets and homeowners at risk. Because Invest Arizona’s 75-percent-property-tax-forgiveness provision is open to any business, enormous new mining or utility projects could overload a rural area’s capacity to provide the necessary infrastructure to support the new development.
  • Shifts Property Taxes to Homeowners and Established Businesses: Property taxes are levied to pay for certain county, municipal and school district infrastructure and maintenance and operation needs. There is a universally-held principle that development should pay for itself. Granting a Class 6 (5 percent) assessment ratio to Invest Arizona businesses means that the property tax burden is double for Class 3 homeowners (10 percent) and quadruple for Class 1 established businesses (20 percent). This is precisely the kind of shift that routinely hampers efforts to narrow the disparities between Class 1 business and Class 3 residential. What holds for Class 1 reductions surely must also apply to shifting businesses to Class 6 as SB 1041 would do.
  • Invest Arizona Scheme is Likely Unconstitutional: According to the Arizona Tax Research Association: “the Arizona Constitution under Article 9, Section 1, states that “all taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax.” While the courts have given the Legislature broad discretion in creating different classes of property, they have also cautioned that those distinctions in use, purpose or industry must be “real” and not be “arbitrary, specious or fanciful.” In addition to being bad policy, ATRA believes that creating such disparate tax treatment between identical companies in the same taxing jurisdiction based solely on the timing and size of the investment is unconstitutional.” Also, 100 percent of NFIB’s 7,500 Arizona members are on the losing side of the SB 1041’s timing and size criteria thereby creating 7,500 potential plaintiffs for the inevitable constitutional challenge to the Invest Arizona scheme.

We fully endorse the approach taken in the recently enacted “jobs bill” (HB 2001) that lowered business’ property tax burden across the board regardless of when they arrived in Arizona or their size. SB 1041’s provisions run contrary to the jobs bill’s evenhanded approach and should be rejected not only because it’s bad tax policy but because it’s likely to be struck down as unconstitutional.

Thank you for considering our position when deciding how to vote on this terminally flawed piece of legislation.

Sincerely,

Farrell A. Quinlan, Arizona State Director, National Federation of Independent Business


Comments

  1. Oberserve says:

    The solution to the ridiculous property tax system in Arizona is prop13arizona -DOT- com

    Oddly, Farrell Quinlan, the Exec Dir of NFIB opposes prop13arizona property tax reform.

    Talk about not serving the NFIB membership!

  2. There has to be other ways to recruit businesses to AZ other than giving them money. For one thing, we dont have any. Second, we keep hearing from the Gov that AZ is doing great and recruiting businesses, but it sure dont look like we do it without giving away the store, and GPEC and the rest are making the case that we need to give until it hurts or we will not gain new businesses.
    So which is it? Are we doing great like the Gov says? Or do we need to bribe businesses to come here because otherwise we suck?
    I thought the AZ Commerce Authority was the answer to our prayers for Econ Dev? I guess thats just window dressing for Highground to get their “donations to the Ice Fund” like Nucky on Boardwalk Empire.

    • Oberserve says:

      Did anyone actually READ the AZ Commerce Authority/Jobs bill?

      I did. The whole thing.

      It’s a massive giveaway.

      It also creates a New York Port Authority for Arizona.

      WHOOPS WOULDNT YA KNOW IT

      A former lawyer for the New York Port Authortity (Republican Representative John Kavanagh from LD8) wrote the bill!

  3. Jefferson Smith says:

    Take a look at whose on the record favoring SB 1041:

    AFL-CIO honcho Rebekah Friend
    Arizona Association for Economic Development
    Arizona Bankers Association
    Arizona Chamber of Commerce and Industry
    Arizona Contractors Association (ACA)
    Arizona Manufacturers Council
    City of Avondale
    City of Chandler
    City of Flagstaff
    City of Glendale
    City of Goodyear
    City of Maricopa
    City of Peoria
    City of Scottsdale
    City of Surprise
    East Valley Chambers of Commerce Alliance
    East Valley Partnership
    Flagstaff Chamber of Commerce
    Greater Phoenix Economic Council (GPEC)
    Greater Phoenix Chamber of Commerce
    Greater Yuma Economic Development Corporation
    League of Arizona Cities and Towns
    Maricopa Community Colleges
    Town of Buckeye
    Town of Florence
    Tucson Regional Economic Opportunities (TREO)
    Valley Partnership

    This group is proof positive that somebody’s taxes are going up in SB 1041!

  4. Fred says:
    April 6, 2011 at 5:59 pm
    There has to be other ways to recruit businesses to AZ other than giving them money
    ………….

    Let’s see, we have abundant sunshine, excellent weather the majority of the year, a state loaded with maybe the most variety of natural wonders and ecosystems in the 50 states, lower real estate, plenty of room … no annual snowstorms, ice storms, tornados, greedy union monopolies … what’s keeping businesses and their entire work forces from flocking here from cold, dreary, crowded, high priced, high tax states … oh wait a minute.

    If the corporations and business are not already here, just ASK them why. If they say, THIS tax and THAT fee and corrupt politicians, then FIX those and then just put the updates in the news and wait. Build a better business environment for ALL and they will come, they will stay, they will start up new.

    How could it be possibly good for the environment if we have to import everything from China, across the Pacific when we can manufacture right here in AZ?

    Short term focused political greed is what’s keeping business away.

  5. ATRA has no credibility, nor standing, to declare what is or is not constitutional. The policy in 1041 is clear — create new jobs, make new investment, and get a temporary alleviation of the ridiculous tax burden. Those that would oppose the creation of this kind of incentive are in favor of the status quo and against serious economic progress. Thank you, NFIB, for once again showing your short sightedness.

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