There is much discussion among lawmakers and the Governor this year about how we will prioritize the many needs of the state. Education – all day kindergarten, universities, and k-12 – all want a piece. Then there are the requirements of the State to back fill the financial fallout of Prop 206 in the way of increasing funds to developmentally disabled car providers.
Amid all these constituents who are making their case for additional money – one hand out should raise a lot of eye brows. And that’s the hand (probably dressed in a very expensive suit) of some venture capitalists in the state.
SB1212, the ‘Angel Investor Tax Credit Bill’, is not as sweet sounding as its Orwellian assigned name indicates. A more apt name would be to call it the Shark Tank Bill because of its many similarities to the hit TV Show, with one difference: wealthy investors get a tax credit for making their risky venture capital investments.
Under the bill government employees at the Arizona Commerce Authority will dole out tax credits to “qualified” investors to hedge their potential losses in risky new start-up companies. The argument made to defend the program is Arizona needs the tax credits to attract more investors into Arizona and that without them, good ideas in Arizona won’t find capital. This of course is not true. Good business ideas and plans can always find money to get off the ground because investors stand to gain millions of dollars in profit to do so.
The reality is, if a business is unable to attract the start-up capital it needs, perhaps the venture is not seen as viable, or scalable or profitable enough. If that is the case, why would taxpayers be expected to flip the bill for it? After all, we don’t stand to benefit monetarily from the businesses’ success, why should we therefore shoulder the losses of its failures? And if a business was to attract the necessary start-up capital regardless of the tax credit, why are taxpayers subsidizing a business activity which would have occurred anyway?
Venture capital investing is inherently risky. Successful speculations have the potential to enrich their investors immensely. However, it is the risk itself and the profit motive which tempers the activity, and incentivizes investors to be prudent. The Arizona Commerce Authority is not better equipped than the free market to facilitate these types of transactions.
Taxpayers should not be in the business of subsidizing risky venture capital investments by wealthy investors. It’s a program that picks winners and losers among taxpayers, among venture capital investors, and among aspiring entrepreneurs.
Lawmakers should continue to stay out of the venture capital business and reject SB 1212.
Mayor Greg Stanton claims that the City of Phoenix is beating the competition in attracting new businesses and jobs because of targeted tax subsidies and social progressive policies.
The Club debunks these claims and shows that any credit for job growth in Phoenix belongs to an overall business friendly environment of low-taxes and regulation in Arizona.
The Club recently shed light on the effort in Pinal County to ask voters to approve an additional half-cent transportation tax increase on top of the current transit tax. Following a series of State Auditor General reports, the existing tax—which dates back to the late 80’s—has a long recorded history of misuse and misallocation of funds. Transportation dollars have been used to give Christmas bonuses to city employees and the majority of the dollars are being allocated to the politically powerful municipalities in the county and not going toward needed regional road projects.
Due to opposition from the plan from the autodealers, homebuilders and taxpayer watchdog groups like the Club, the Pinal Regional Transportation Authority (RTA) backed off on forcing a vote on the measure and has been working to figure out how to overcome the critisism of the $640M spending spree.
Their solution? They have asked Representative TJ Shope to sponsor special legislation to allow the RTA to include lower tax rates for certain tax classifications (likely automobiles and new home sales) as part of the proposed tax increase, an obvious attempt to buy off the political opposition to secure passage of the tax hike.
It is simply poor policy to create carve outs in the tax code that pick winners and losers among taxpayers. If Pinal County leaders believe more resources are needed for transportation, they ought to look internally first, both how they have managed past funds and prioritized transportation projects. We think they would find a great opportunity for improvement. And perhaps they could save their residents a little money too.
While most people were enjoying the holidays with their family late last month, the local media was trumpeting a story declaring that Arizona has the lowest election integrity in the nation:
“Arizona was ranked worst in the country for electoral integrity in a recent post-election survey of political scientists.
The Perceptions of Electoral Integrity survey asked political experts about elections in the states where they live in order to measure their perceptions of how well or poorly their state adhered to international standards of conduct before, during and after an election.
Although it measures perceptions of electoral integrity, as opposed to actual electoral integrity itself, the methodology is widely trusted and used to compare electoral performance around the world.
The concern is that just the perception of electoral fraud or corruption, even without actual proof of fraud, could lead to a loss of public confidence in the voting process.”
While Arizona was the subject of some election controversy over the last year (the Presidential Preference Election comes to mind), being ranked dead last in election integrity should have generated some scrutiny by local journalists. Instead the media ran with the story, though a cursory look at the report and the organization behind it, the left leaning Electoral Integrity Project, would have exposed its shortcomings.
For example, the State of Michigan, which ended up having more votes cast in November than voters, somehow was ranked higher than Arizona in election integrity. Another common theme by the “experts” participating in the study was that states with stricter voter ID laws (such as Arizona and Wisconsin) consistently scored lower on election integrity than states with liberal voter ID laws like Michigan*. Though voter ID laws are controversial, including them as a component that erodes election integrity is an unfounded conclusion based upon the opinion of the authors.
Additionally, Arizona scores near the bottom on integrity when it comes to district boundaries and gerrymandering. That is a very peculiar result since Arizona has, unlike most other states, an independent redistricting commission that draws our legislative and congressional lines. Do the authors of the study (or the Arizona “experts” they talked to) have evidence of corruption on the commission that is worse than other states? Very doubtful, yet not a single reporter even questioned this finding.
Instead, the media completely accepted the work of an organization that in the past claimed that Cuba and North Korea had more election integrity than half the states in the US.
Now whether this happened because of an unwillingness to fact check or because of an underlying desire to believe the study, we will never know. And to the credit of the Arizona Republic, they are at least trying to clean up the mess. But the damage from the media coverage and the false narrative it created will continue to live on.
*Michigan passed a new voter ID law after the 2016 November Election
Yesterday Governor Ducey gave his much anticipated State of the State speech, outlining his policy and budget agenda for this year. One of the better initiatives announced is a new program to identify and eliminate job-killing regulations.
Deemed the “Regulatory Rollback” initiative, this citizen driven program allows taxpayers and business owners to recommend rules and regulations that stifle growth and either need to be fixed or repealed. Anyone can make recommendations at the website http://azgovernor.gov/redtape/
The Governor’s goal is to slash 500 regulations by the end of 2017. The Club commends Ducey’s commitment to making Arizona the best and easiest state in which to start and grow a business, and urge every resident to visit www.azgovernor.gov/redtape/ to make recommendations on regulations to be eliminated.