It turns out that Arizona Democrats like welfare for the wealthy after all. After spending weeks railing against a historic $1.8 billion, across the board tax cut that will benefit all Arizona taxpayers and small businesses, Democrats in the House and Senate overwhelmingly voted in favor of SB1124, legislation that (as Senator Javan Mesnard described during his vote explanation) is the definition of welfare for the wealthy.
SB 1124 was the ultimate special interest tax package, so loathsome that it was snuck through the last week of session to avoid the stench of lobbyist backscratching. In reality it was the only way they could put taxpayers on the hook for over $200 million to fund an absurd Low-Income Housing Tax Credit (LIHTC) and Angel Investor Tax Credit program that will do nothing but line the pockets of wealthy Developers and Venture Capitalists.
But this didn’t seem to bother most Democrats, who on one hand refer to broad based tax cuts as “racist,” but are perfectly fine doling out tax carveouts and subsidies to their wealthy allies.
So now we are stuck with a Venture Capital Program that is government picking winners and losers at its worst. The Angel Investor tax credit shields “qualified investors” (i.e. rich people with political friends) from risk by giving them tax credits for their investments. And the icing on the cake—any profits from these taxpayer backed investments are exempt from capital gains taxes. This is welfare for the wealthy—and Democrats happily passed it with the help of a few Republicans.
The Low-Income Housing Tax Credit scam may be even worse. This is a program that has been riddled with fraud and abuse, with banks being forced to issue multi-billion dollar settlements after being caught colluding with developers to manipulate the price they pay for credits to drive down their overall tax liability.
Basically, a developer will qualify for these credits and then sell them to banks and investors who provide the upfront funding. But state level tax credits are less valuable to investors, and they end up buying them for around fifty cents on the dollar. Meaning that of the $160 million program created in SB1124, $80 million goes only to line the pockets of banks and investors, leaving the remaining half for actual development.
The billions that have been spent on these programs across the country have not shown to increase the number of affordable housing units, and they cost above market rate to build. With this vote, lawmakers and Governor Ducey have only given a handout to banks and investors so that a select few developers can build high rises in places like Phoenix and Tucson. It’s atrocious tax policy and a poor solution to help the poor.
So, while Republicans passed an incredible tax package just weeks ago, unfortunately they immediately followed it with the worst of tax policy—Democrat beloved welfare for the wealthy. As Senator Petersen put it, these are not programs dreamed up by lawmakers. They are sweetheart deals brought in by special interest lobbyists, working for a handful of wealthy individuals trying to get their tax liability as close to zero as possible.
This bill should have gone down in flames. Democrats, there’s no hiding it—you support welfare for the wealthy. Republicans, this is a vote that conservatives will not forget.
Help Protect Freedom in Arizona by Joining Our Grassroots Network
Arizona needs to have a unified voice promoting economic freedom and prosperity, and the Free Enterprise Club is committed to making that happen. But we can’t do it alone. We need YOU!
Join our FREE Grassroots Action List to stay up to date on the latest battles against big government and how YOU can help influence crucial bills at the Arizona State Legislature.