Mandatory Sick Leave Proposal Makes Tempe Employers Nauseous

The City of Tempe is exploring joining the ranks of San Francisco, Seattle and New York City in mandating businesses located in town to provide paid sick leave for employees.  Although no formal drafts have been presented of such an ordinance, the council reviewed the possibility at a September 17th working session.  It is another bad idea from the college town which seems to care more about maintaining their progressive image than being business friendly.

Not only is it highly offensive that the city believes it has the right to control how a business administers sick leave, it is simply poor policy.  These types of regulatory controls burden businesses and ultimately inhibit growth.  Policymakers who intend to help the “working person” with such proposals pit the employee against the employer and wind up harming both.  This one-size-fits-all approach ignores the diversity of industries, enterprise size, margins and an infinite number of other factors and complexities.  Take for instance restaurants – serving staff frequently change their shifts with one another in order to accommodate sick or personal days.  This flexibility tends to work out in the wash for both the restaurants management of the bottom line as well as for employees.

Small businesses especially will feel the pain.  For many of them, mandatory minimum sick leave days will factor into their cost/benefit analysis of hiring additional employees.  It is another cost they will have to absorb.  This will be accomplished by not hiring, cutting current benefits, eliminating hours or diminishing profits.  All these options have a deleterious effect on the economy.  The idea that a regulator knows best, how to direct such an intimate policy within every individual business, is absurd.

This seems to be a “solution” looking for a problem.  A study by the Freedom Foundation found most businesses provide a number of paid sick days, workplace illness is not a widespread issue, and mandatory paid sick laws do not reduce employee turnover.  Instead of promoting healthy work environments, such laws seem to be more of a power grab for governments.  Were Tempe successful, they would be expanding their authority greatly.  Additional authority requires more money to support enforcement.  Businesses would then incur the costs to track and report to their local city on top of business licenses, taxes and other regulatory hardships.

Tempe’s notion is not just harmful to the economy, it is also illegal.  In 2013, the state passed legislation preempting political subdivisions on issues of workers compensation, paid and unpaid absences, rest periods and meal breaks.  Critics will claim that such legislation was rendered void when a Flagstaff coalition won a voter ballot initiative in 2006 allowing cities, towns and counties to determine their own minimum wages if they exceed that of the state minimum.  However, in a stipulated judgement by Attorney General Brnovich, the voter initiative was specific to minimum wage and does not impliedly repeal that of the state statute’s other provisions.  If Tempe chooses to move forward, a lawsuit is likely to ensue which will deem the ordinance unconstitutional.

Legalities aside, Tempe is venturing into dangerous territory when it comes to attracting and retaining businesses.  Such extreme invasive policies are likely to isolate their community and make them less competitive with surrounding jurisdictions.  In their effort to create a “workers’ paradise,” they are harming the very entities who provide the work.  


Making Arizona the 10th Income-Tax-Free state: The Economic Case for Tax Reform.

Phoenix, AZ – The Arizona Free Enterprise Club today has released its new study on tax reform titled Making Arizona the 10th Income-Tax-Free state: The Economic Case for Tax Reform.

Written by economist and Heritage senior fellow Stephen Moore, the paper evaluates Arizona’s current level of economic competitiveness in the US and how no-income tax states have historically outperformed high tax states in economic growth.

Some of the key findings in the paper include:

  • Eliminating the income tax would give Arizona a competitive advantage for jobs and new investment. Though Arizona has historically experienced solid economic growth and performance, the housing recession in 2008-2009 hit the state’s economy especially hard. A phase out of the income tax would help Arizona’s economy get back on track and, as a high tourist state, is a an excellent candidate for this type of reform.
  • Job growth in no-income tax states has been more than double the rate than high income tax states. Between business relocation and new startups, job growth from 2003-2013 in states without an income tax, consistently beat high tax states. In fact, from 1990 to 2014, Texas and Florida experienced almost triple the job growth than that of California and New York.
  •  People are voting with their feet to keep more of their income. On net, 1,000 people are migrating to low tax states each day, while approximately the same amount is exiting high tax states. That means that about $125 Billion in purchasing power (adjusted gross income) is going from one state to another, with low tax states benefiting the most.
  •  There is no evidence that high tax states provide better or more services than states without an income tax. In many cases, such as California and Illinois, high tax states end up paying more for services, but in fact have far worse outcomes in terms of quality of service or improving lives.
  • Politicians should spend more time creating a climate conducive to economic growth than trying to close wage gaps. Contrary to the belief that consumption based taxes harm low income families and increase income inequality, there is no evidence for this to be the case. In fact, the evidence shows that progressive tax policies end up chasing away workers, businesses and capital, which lead to lower wage growth and fewer opportunities for low and middle-income workers.

“Eliminating the income tax is a matter of economic competitiveness, and we need to be proactive to keep up with other states.” Free Enterprise Club President Scot Mussi said.

Mussi continued, “There is no doubt that comprehensive tax reform that includes moving away from the income tax will lead to faster growth, more jobs, and additional revenues to finance public services. It is a winning formula for Arizonans at every income level.”

The paper can be viewed online by clicking here.  For additional information on the Club’s policy paper on the economic benefits of eliminating the income tax, contact Scot Mussi at or at 602-508-6088.


Glendale’s Light Rail is a Fast-Track to Disaster

August 25th, City of Phoenix voters passed a ballot initiative to raise their sales tax for transit three cents to support a transportation plan that predominantly expands light rail.  An aggressive one-million-dollar-campaign led by the Mayor and transit groups against the opposition, who spent only several thousand dollars, concluded in only 55 percent of voters in favor of the initiative.   It takes a colossal campaign to convince residents they need to spend $31.5 billion dollars over the next few decades on public transit that serves less than one percent of the population.  Here is a quick recap of why Prop 104 was just bad for taxpayers, or a more comprehensive analysis of why light rail is a failure in the Phoenix metro area.

Now, other transit-champion politicians are seeing the “victory” in Phoenix as their permission to force-feed light rail down their tax payers’ throats.  The City of Glendale has jumped on the light rail train and is proposing voters foot the bill to connect to Phoenix’s system to downtown Glendale.  This is the same Glendale whose bond ratings were downgraded twice in one year.  The same Glendale who negotiated perhaps the worst sports teams deal ever.  Yes, it’s the same old Glendale alright who seems to have an insatiable appetite for debt.

So perhaps it should be of no surprise that Glendale is now on the light rail fast-track to financial disaster.  Glendale’s scheme is estimated to cost a total of $543 million, with $110 million coming from Glendale taxpayers. This ill-conceived plan relies on 67 percent of the funding to come from federal transportation funds which for years have been drying up and which typically only account on average for 25 percent of state and local transportation projects.  This is on top of Glendale’s already untenable financial situation.

And this assumes that projected costs are accurate.  Light rail construction is infamous for cost overruns.  In 1998 for example, Phoenix’s first 13 miles of light rail was reported to cost $30 million per mile.  Within six short years light rail was costing $96 million per mile.  The final cost at the time of completion was a staggering $110 million per mile – more than tripling the initial estimates.  This isn’t the exception for light rail, it is the norm.  According to reports by the Department of Transportation, between 1990 and 2013, only one light rail project in the country stayed within estimated costs for construction.

Glendale light rail supporters, such as Gary Sherwood, claim their city will see a boon of development if they “invest” in this boondoggle.  After all, Valley Metro claimed seven billion dollars’ worth of new development as a direct result of light rail in Phoenix, why can’t the same happen in Glendale?

If only it were true. Our own analysis of the economic claims being made by Valley Metro showed that virtually none of the economic development that occurred along the light rail could be attributed to light rail. Rather, most of the ‘claimed’ economic development along the light rail didn’t happen, received generous subsidies to be built or would have been built anyway.

Now observe the intended light rail paths in Glendale.

  • West on Glendale Avenue from 19th Avenue to 51st Avenue.
  • West on Camelback Road to 43rd Avenue, north on 43rd Avenue and west to 51st Avenue.
  • West on Camelback Road to 43rd Avenue, northwest along Grand Avenue to 51st Avenue and north to Glendale Avenue

Glendale is having a hard enough time attracting visitors to their community for major sports attractions.  The notion that they can build it and they will come…to Glendale’s downtown…is a little more than naïve.  Not only does this part of Glendale lack general allure, but the additional time it would take for light rail commuters would be an inhibitor.  From downtown Phoenix someone in a car can get to downtown Glendale in a matter of 30 minutes.  To take the light rail would probably take closer to 60-70 minutes.

Glendale, like Phoenix and most of the country is ill-suited for light rail.  The high capital costs are bound to require more financing from a city that is already way over-extended.  Glendale’s grand vision of a springing metropolis of development as the result of light rail is at best a pipedream.  And by the time they have realized the sinking costs, long time of construction and low usage – the imminent reality of driverless cars will have rendered the entire system all but obsolete.  Hopefully Glendale’s leaders will make the right choice and pump the breaks on the light rail collision course.




If You Can’t Use A Hatchet, Opt for a Scalpel: Reformations to AHCCCS

Governor Doug Ducey continues to live up to his campaign promise of bold reform and better government with his proposed modifications to Arizona’s Health Care Cost Containment System (AHCCCS), also known as Medicaid.  The proposal, which requires federal approval, contains several common sense reforms that will reduce fraud, save taxpayers money and empower Medicaid recipients to have more control over their health care decisions.

Arguably the most controversial reform in the package is the proposal to cap Medicaid benefits for childless adults to a lifetime maximum of five years.  Already the drumbeat of opposition to this change is mounting, and as deafening as the outcry may be, one only needs to look back to the 1990’s to know that we have seen this movie before.

When Congress passed and President Clinton signed sweeping welfare reform, it was declared by opponents and pundits across the nation that reduced benefits would increase poverty, harm low income families and damage the economy. Curiously enough, included among the reform package was a lifetime limit of 60 months (five years) for welfare recipients.

What was the result of these reforms: Employment for single mothers soared from 44 percent to 66 percent through the mid 90’s and early 2000’s!  Imagine that, the very reforms that were suppose to harm low income families resulted in higher employment and a better quality of life. The proposed AHCCCS limit will achieve the same result.

Incentivizing employment is important, controlling costs is critical.  Currently AHCCCS is wrought with moral hazard.  Recipients are insulated from the costs of care as they share in no part of the expense.  The system lacks accountability for missing appointments, seeking hospital service when primary care would suffice or participating in preventative care.  According to the Oregon Health Exchange Study (OHES), the only randomized and controlled study of its kind, individuals covered under their state’s expanded Medicaid utilized “free” emergency rooms 40 percent more than when they were uninsured.  To boot, recipients reaped no significant health benefits in two years of the study.

That is why the Governor’s proposed AHCCCS reforms include cost sharing of copayments up to three percent of household income.  Recipients will now be more invested in making wise choices about their health care choices when they are conscious of the bill.

In addition to copayments, Ducey’s plan includes mandatory contributions to a Health Savings Account (HSA.)  Recipients pay a premium equal to two percent of their household income which can be used to pay for non-Medicaid covered expenses such as dental or vision.  HSA funds can only be accessed if a recipient is employed, actively seeking employment, enrolled in school, or taking a job training program.  This better equips beneficiaries to budget healthcare costs as they transition into self-sufficiency.

Due to Obamacare and the expansion of Medicaid, the government now controls nearly half of all the health care spending and more than half of the health insurance dollars in the country.  Unsurprisingly, hundreds of billions of medical dollars are wasted each year, which add no benefit to the patient.

It is easy to see why these Medicaid reforms are so important, we will know soon enough if the feds see it the same way.

Uncorking Consumer Choice: a Case for Direct Wine Sales

Last legislative session the Governor signed a bill raising the production cap for craft breweries and allowing these manufacturers up to seven retail locations to sell their product directly to the consumer.  This was a win for the growing craft beer industry and allows them to continue to flourish and serve consumers.

A similar opportunity exists for the wine market in Arizona.  Currently it is illegal for Arizona wine-lovers to direct ship more than two cases of wine in a calendar year from a winery in or out of the state, if that winery produces more than 20,000 gallons (8,412 cases) a year.

A little history…In and out of state wineries used to be strictly prohibited from selling directly to consumers.  They were required to sell their product to a wholesaler who sold to retailers to sell to the public.  In 1982 lawmakers made an exception for Arizona wineries in an effort to give them an economic boost.  The exception applied to any in state winery producing less than 75,000 gallons – which was all of them.

This isolationist practice to give special treatment to in-state wineries was common throughout the country, except there was just one problem– it is unconstitutional.  Under the Commerce Clause in the constitution, states are prohibited from passing legislation that discriminates or excessively burdens interstate commerce. As a result, several groups sued Michigan and New York that had a similar exception as Arizona, and won.

After the Supreme Court ruling in 2006 Arizona had to scramble to comply.  At the grumbling of large distributors and other wine interests, the cap for direct shipment to consumers was lowered to wineries who manufactured less than 20,000 gallons a year.  This still included all Arizona wineries except one – Kokopelli Winery – who produced 30,000 gallons each year.  To appease them, the restriction on “stacking” liquor licenses was removed so their facility could sell their wine on premises directly to consumers in addition to manufacturing.

While the new cap allowed direct shipment by very small wineries, the same onerous restrictions (and lack of consumer choice) still exist for most other vineyards. There are over 1,000 wineries in the country that produce more than 20,000 gallons a year.  Larger out of state wineries must apply for an Arizona 2W series liquor license just for the consumers who will visit from out of state and who can only purchase two cases each year. In fact, Arizona is one of only three states that tie direct wine sales either to a cap in production or requires that a person visit a winery to ship the product directly.  Every state in the western United States, with the exception of Utah, allows for direct to consumer wine shipment.

The reality is that in the 21st century economy consumers are demanding more choices and options, and Arizona needs to keep up. In the click-and-buy, Amazon enriched marketplace, everyday people don’t understand why these complex restrictions on their purchasing freedom exist.  These limitations on direct to consumer shipping is just one example of the vestiges left of the three-tier system that has long outlasted its relevancy and failed to serve the public good.  One thing is for sure – it is time to uncork the wine industry and toast to more consumer choice.