by admin | Apr 20, 2019 | Corporate Welfare, News and Updates
For
months now, the AZ Attorney General Mark Brnovich and the Arizona Board of
Regents (ABOR, the governing body for Arizona State University) have been in
embroiled in a hot legal battle over taxpayer subsidies for wealthy developers.
At
the center of the legal dispute is whether ABOR has violated several provisions
of the Arizona constitution designed to protect taxpayers from crony capitalist
giveaways.
Evidence
suggests that they have.
The
framers of Arizona’s constitution understood that property taxes are a zero-sum
game, and that any levy assessed should be as fair and equitable as possible. If someone pays less as a result of a special
interest carve-out, everyone else will be forced to pay more. To prevent picking winners and losers
through the property tax code, the framers installed several key protections in
our constitution:
- Uniformity
Clause, “all taxes shall be uniform upon the same class
of property within the territorial limits of the authority levying the tax, and
shall be levied and collected for public purposes only.”
- No Evasions, “no property shall be exempt which has
been conveyed to evade taxation”
- No Exceptions, “All property in the state not exempt under the laws of the
United States or under this constitution or exempt by law under the provisions
of this section shall be subject to taxation to be ascertained as provided by
law.
- No Gifts, “Neither the state, nor any county, city,
town, municipality, or other subdivision of the state shall ever give or loan
its credit in the aid of, or make any donation or grant, by subsidy or otherwise,
to any individual, association, or corporation.”
Governmental entities, including public
universities, do not pay property tax. This makes sense as the
money to pay the taxes would have to be taken from taxpayers in the form of
more taxes. But for decades now, local cities as well
as ABOR have devised creative solutions to exploit their exemption from
property taxes and “lend” it to private developers.
ASU Projects: Research Park, Marina Heights,
and Omni Hotel Are Evidence of Gamesmanship:
“Research Parks”
In
the 1980’s ASU formed a “research park” which strived to have private business
and students working alongside each other in educational pursuits to launch
ideas into the marketplace. This was
permitted legislatively, and the university paid the same rate of taxation as
other users in the same classification but on a mere 1 percent of their
property value. It soon became quite
obvious that the mission of the research park was creeping beyond the original
intent of the legislation and as a result, major corporations were enjoying
major tax deference for what was their normal business operations.
Between
the research parks of University of Arizona and ASU, they host approximately 50
companies in 4 million square feet.
These companies don’t pay property taxes but instead pay a “tariff” to
the university as well as the city. All
the other jurisdictions, including the State of Arizona who rely on property
taxes, get absolutely nothing.
Marina Heights
Marina
Heights is located on Tempe Town Lake and includes the well-known “State Farm”
building. In December 2017, with a deal that captured headlines in the state, the building’s “lease-back”
was sold to a business partnership that includes Arizona icon and business
insider Jerry Colangelo for almost $1 Billion – one of the largest commercial
land transactions in state history.
One
of the most valuable assets of the property was the value of not paying taxes. In fact, that value is approximately $12.1
Million a year of which $3.45 would be owed to the State, $6.6 to the Tempe
Elementary and Tempe Union school districts, and $1.2 million to the Maricopa
Community College District. Not only do
these jurisdictions have to back fill their budgets and other property owners
make up that difference, but other like businesses must try to compete with a
colossal tax advantage.
Omni Hotel
Brnovich’s latest suit filed in January of
this year centers around a project called Omni Hotel (located on Mill Ave and University) and
predominantly argues the deal included a massive violation of the state
constitution’s gift clause.
In
typical ABOR fashion, the Omni Hotel transaction is a sweet deal for developers
and less so for taxpayers as a whole. ASU
will spend $19.5 Million to construct a conference center and parking garage
and pay $8 Million to the hotel for use of that parking garage to the profit of
the hotel. ASU will only be allowed use
of the conference center 7 days out of the year.
It
is a 60-year lease with an express provision of evading taxes by requiring a
“in lieu of taxes” payment of $1 Million a year. The hotel is only on the hook for $85 per
square foot for rent even though within two blocks there are other hotels that
sold for a market rate of $212 – 216 per square foot – a seemingly $9 Million
subsidy.
This
major injection of corporate welfare does not even account for the $21 Million in tax incentives being given
by the City of Tempe.
Justice for Taxpayers
Given
the explicit intentions of the state constitution to protect the property tax
base from chicanery of the system; ABOR’s long-standing history of using their
tax-exempt status to shield corporate entities should not be ignored. AG Brnovich is doing a service to every taxpayer
in the state by calling for an end to this blatant illegal practice.
Afterall,
ASU is also constitutionally bound to make tuition “as nearly free as
possible.” Year after year of tuition hikes on Arizona
students are certainly hard
to square with hundreds of millions of dollars in corporate giveaways.
by admin | Mar 12, 2019 | News and Updates, Tax
An interesting paradox has developed at the legislature this year. Even though state policymakers are sitting on record tax revenues and a robust Arizona economy, they seem more obsessed with tax increases than ever before.
So far this session there are efforts by Republicans to increase the sales tax by $600 million, raise the gas tax by $750 million, increase income taxes by $200 million, impose taxes on most internet transactions at a cost of over $250 million, retain the $190 Million VLT registration fee and allow political subdivisions to increase sales taxes at the local level. All together it would amount to over $2 billion in tax hikes, a mind-blowing amount that would dwarf any previous tax increase enacted in the State.
The arguments in favor of each of these tax hikes vary, but most surround the topic of additional funding for K-12 schools. This sentiment was understandable. As Arizona stumbled through eight years of job killing policies under the Obama Administration, there was mounting pressure to find new funding sources for education to address the state’s anemic revenue growth.
Fortunately, this is no longer the case. Between the change in administrations in Washington and a consistent focus on pro-growth policies here at home, our economy has taken off. Arizona now has the 3rd fastest growing economy in the country. People are once again flocking to the state, and the Arizona Office of Economic Opportunity projects that 165,000 new jobs will be created by 2020.
This has created a gusher in new tax revenue, most of which is going to K-12. Lawmakers are in the process of funding Governor Ducey’s ‘20by20’ teacher pay plan and restoring District Additional Assistance, which combined will add over $1 Billion in new dollars for public schools by next year.
When fully implemented this will be the largest increase in K-12 funding in state history, and will push per pupil funding so high that lawmakers will be forced to override the education spending limit in the Arizona constitution. This is only the 2nd time in 40 years that such an override vote will be required, a fact that should please everyone that has worried that not enough emphasis has been placed on education funding at the legislature.
And here is the best news yet—even after this large infusion of cash into the classroom, Arizona will still have a projected $1 Billion dollar surplus for FY 2020. It proves that the problem was the need for more taxpayers, not tax hikes.
Yet our political class appears ready to go all-in on job crushing tax increases that will derail Arizona’s economic recovery. While this may excite states like Texas looking to poach our entrepreneurs and job creators, it is bad news for everyone else that wants to keep prosperity here in the state.
Lawmakers instead should be looking to embrace our success, maintain the course and continue to pursue pro-growth ideas that work. Now is not the time to surrender to policies or politics that will move Arizona in the wrong direction.
by admin | Mar 1, 2019 | Elections, News and Updates
Every American, no matter their political party, should have a significant interest in the wholesale integrity of the election process. And yet the business of ensuring citizens voting is honest, clean and untampered with, has been a fiercely partisan issue, dividing Republicans and Democrats into two camps: the party for election integrity and the party against “voter suppression.”
The integrity of the elections systems is two-fold: ensuring there are legal and procedural safeguards to maintain clean and accurate voting rolls and preventing, discovering and deterring fraudulent activity.
One would think that maintaining up to date voter rolls would be an innocuous issue. After all, neglecting to do so all but guarantees records will be cluttered with deceased persons and those who have moved out of state. In a 2012 study, the Pew Research Foundation found that 24 million voter registrations in the United States were either invalid or significantly inaccurate – that is one in every eight registrants. This vast vulnerability directly dovetails into susceptibility of election fraud.
The issue of election fraud is as old as elections themselves and take form in a variety of ways including – double voting, ineligible voting, and voter registration fraud, etc. Yet, this type of crime is notoriously difficult to catch, document, and enforce, which makes the problem significantly underreported.
Following the Arizona general elections of 2018, many voters voiced concerns over how specifically the Maricopa County recorder’s office conducted operations. And given the thin margins in many of the state-wide races, a little bit of fraud can have a big effect.
As a result, several Arizona lawmakers have introduced legislation to insert more practical checks into the system to both scrub voter rolls and fills cracks where the system is susceptible to fraud.
The best batch of election integrity bills have been introduced by Senator Michelle Ugenti-Rita (R) and include:
- SB 1046 requires voters who receive a ballot by mail to return that ballot by mail. If they do not, they may vote in person on election day with a standard ballot. Practically, this bill helps prevent the illegal practice of ballot harvesting.
- SB 1072 requires voters to show identification when voting at an early voting location. This makes the identification requirements consistent across all methods of in-person voting. And although Democrats want to claim the basic function of showing I.D is burdensome to voters, 76 percent of Americans believe such requirements should be mandatory.
- SB 1188 requires a county recorder to remove a voter from the permanent early voting list and cease sending them early ballots if the elector has not voted in two consecutive primary or general elections.
- SB 1090 requires electors voting at an emergency voting center to sign an affidavit under penalty of perjury that they did in fact suffer an emergency. Also requires the County Board of Supervisors to sign off on location, quantity and hours of emergency voting centers.
Given the reasonable proposals being suggested, one might be surprised by the very vocal fidelity of the left to the notion that 1. Fraud doesn’t exist, 2. When it does it is insignificant, and 3. Any legal framework that inserts predictable rules and guidelines into the system disenfranchises voters.
This is less surprising when you consider the bills drafted by Democrat legislators this year which take a free-for-all approach. Their philosophy seems to be the more votes cast the better – even if those votes are duplicative, unverified, or non-citizens. These bills include repealing the prohibition of ballot harvesting, same-day voter registration, and automatic restoration of voting rights for felons.
These election integrity bills are important steps to shore up weakness in Arizona’s election process. Despite the left’s effort to diminish the relevance of the election integrity issue, the real disenfranchisement of voters comes from diluting the votes of honest electors. Allowing for the erosion of the system casts doubt into the minds of citizens as to if their vote even counts – and that is true voter suppression.
by admin | Jan 30, 2019 | Free Market, News and Updates
The individual health insurance market has been a roller coaster for consumers since the passage of the Affordable Care Act.
Last year, the average ACA plan rose 34 percent – pricing out many of the individuals who do not qualify for federal subsidies. Additionally, many counties across the country have lost insurers, with only one option or even no options for consumers. Younger, healthier Americans have been forced into high-risk pools to subsidize the high-costs associated with pre-existing conditions and other benefits they are likely not to need. As a result, many have opted out of full coverage at all and risk incurring the Obamacare tax penalty for not carrying insurance.
After a failure of the Senate to repeal these disastrous policies, the Trump Administration has had few options for fixing our health insurance system. However, a year ago, some progress was made on this front.
With the passage of the Tax Cuts and Jobs Act in December 2017, Congress included the repeal of the tax penalty for individuals without medical coverage for policies beginning in 2019. Then in February of 2018, Trump issued an executive order allowing for the appropriate federal agencies to amend their rules regarding short-term duration health insurance.
Short-term duration insurance is not meant to qualify as full medical coverage, but instead is another insurance product available to help individuals through different periods of transition. Trump’s executive order overturned the Obama Administration’s directive to limit these plans to only 90 days. Instead they are now allowed to be issued for less than a year and may be renewed for up to three years.
These short-term plans will likely cost Americans half what the traditional ACA plan costs and the administration predicts around 600,000 people will choose these plans this year. Of the over half a million people, no more than a third are likely to leave their ACA plan; with most enrollees coming from individuals without any insurance at all.
Opponents argue the reversal of this rule will poach enrollees in the individual market. Obama’s rollback of short-term duration policies was meant to increase enrollment in the exchange. But it didn’t work. Instead, enrollment in the ACA plans decreased by 10 percent following the year of the rule change; which may have had something to do with premiums increasing by 21 percent that year.
There is a want and a need for more affordable policies that do not have all the bells and whistles of a traditional plan. Under the Obama 3-month cap of short-term policies, enrollees would have to reapply every 90 days, forcing a reset of their deductibles or sometimes a cancellation of their policy altogether. Given the short time frame, many customers would not be able to access full coverage insurance for months, until another enrollment period opened.
This rule change is good for consumers. It will dramatically expand choice and opportunity for coverage to hundreds of thousands of Americans.
Now it is up to the states to ensure these options will be available to their constituents by amending their laws to allow for greater regulatory flexibility of short-term duration plans. In Arizona, Representative Nancy Barto is sponsoring legislation to do just that. We encourage lawmakers to support this common-sense bill and allow more Arizonans to access affordable coverage.
by admin | Jan 23, 2019 | News and Updates, Tax
For over a year, the Club has been urging policymakers to address the looming tax conformity crisis. After the passage of the Tax Cuts and Jobs Act in Congress in 2017, it was realized that Arizona taxpayers could pay as much as $300 million more in FY2020 as a result of how Arizona conforms with the Federal tax code. It was never intended that federal tax reform would result in higher state income taxes, and is why a conform and reform plan must be adopted to stop the tax increase.
Yet with tax season now upon us, the legislature and Governor Ducey have still not agreed on a plan. Instead, there have been overtures on identifying ways to justify keeping the windfall, including spending on new programs or sticking the money into the ‘rainy day’ fund. Make no mistake, any plan that does not include returning the money to taxpayers is a tax increase and should be rejected.
With time running out, crafting a conform and reform plan should be at the top of the legislative to-do list. Senator J.D. Mesnard (LD 17) has consistently shown leadership on the issue, and has introduced legislation that would conform Arizona with the federal tax code while forestalling the tax increase.
Under Mesnard’s SB 1143, each income tax bracket would be reduced by 0.11 percent for the 2018 tax year, a rate cut that would hold taxpayers harmless in the short term while not disrupting the filing process currently underway. This would also give lawmakers some additional time to consider a more robust conform and reform plan, similar to what has been adopted in states such as Idaho, Georgia or Utah. The Club believes that conformity provides a great opportunity to improve and simplify Arizona’s tax code, but if an agreement cannot be reached on a reform package, returning the money to taxpayers is still better than any plan to keep it.
Following the implementation of a new higher-than-expected VLT fee, trust is thin with Arizona taxpayers. The Legislature needs to rally around a conform and reform solution and not try to sneak another tax increase through the back door.
by admin | Dec 7, 2018 | News and Updates, Tax
Lawmakers can’t say they weren’t warned. Last year, when the Arizona legislature proposed giving their taxing authority away to the Director of the Arizona Department of Transportation (ADOT), we fought hard to stop what the Club considered one of the worst pieces of legislation in recent history.
Now those chickens have come home to roost.
At the beginning of the month, ADOT decreed they will be imposing a $32 license tax on every privately owned registered vehicle in the state of Arizona. The new fee is 50 percent higher than what was estimated when the tax increase was being debated last spring. The fee is supposedly set at the value necessary to fund Highway Patrol, which was previously paid for through the gas tax, VLT revenues and the state general fund.
Why is the fee much higher than originally thought? After the ADOT Director was granted unilateral authority to set the fee, the budget to fund Highway Patrol came in $37 Million higher than originally estimated. They also discovered that they were poor at counting cars and that the pool of taxable vehicles was smaller than originally thought. The result: an $185 Million-dollar tax increase.
Now many lawmakers who voted for the bill are outraged by the Director’s audacity to levy a tax that is higher than they believe it should be. What did they expect? This is what happens when you farm out core governmental functions to bureaucrats. They empowered the Director to enact the tax and now lawmakers are upset that he is doing exactly what they told him to do.
This likely won’t be the only sting taxpayers feel from the new car tax if it is not repealed. Nothing in the law precludes the ADOT director from raising this fee every year. There are no controls in place to stop bloated budgeting or gaming the numbers to generate revenue for other purposes. Nothing to stop this fee from being assessed arbitrarily, making it higher for certain types of vehicles i.e. imposing a “climate change” tax for gas guzzlers. And no protections exist for low-income individuals who are less able to afford the fee.
Policymakers thought that by handing off fee authority to the ADOT director that they could quietly raise taxes without having to take responsibility for the new fee. They were wrong.
Voters know a tax when they see one, and they won’t be very sympathetic to bureaucrat-blaming or assertions that this is a user fee. They will be further incensed by the sneaky maneuvers used to skirt the constitutional requirement of a 2/3 majority vote to enact a new tax.
Hopefully the same lawmakers that are having buyer’s remorse will do the right thing and repeal this absurd tax from the books.
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