PHOENIX — Gov. Jan Brewer has signed into law a more than $17 million tax break exclusively for two kinds of companies.
Brewer signed the law Friday spelling out that firms involved in manufacturing and smelting no longer have to pay the state sales tax on electricity and natural gas they buy. The change, sought by the governor when she gave her State of the State address in January, takes effect later this summer.
Virtually every other firm and individual remains subject to the 5.6 percent levy, which generates about $500 million a year.
Brewer said the new law should help Arizona both retain existing jobs and attract new ones.
At this point, the Arizona Administration Department estimates that fewer than 6 percent of all workers are employed at firms considered manufacturers.
Steve Macias, president of Pivot Manufacturing, said this targeted tax break is important to companies like his.
Macias, who also chairs the Arizona Manufacturing Council, said it’s not so much what the law means to his firm, which does contract manufacturing and milling for others. He pegged his company’s savings at only a couple of hundred dollars a year.
But Macias said the tax break means a lot to larger manufacturers, “the General Dynamics of the world, guys who make equipment for the solar industry.”
“So, when they attract those guys, I get excited because, to me, those are all potential customers,” he said.
Said Brewer: “Until today, Arizona was one of only a handful of states that imposed this tax.”
The legislation allows cities to decide whether to keep imposing their own sales taxes on utilities.
Counties, however, have no such ability to opt out. And Brewer, after signing this bill, vetoed a provision in the state budget to reimburse them the $1.3 million they will lose. The governor said holding local government harmless for state tax policy changes “would have set a policy precedent that would undermine future efforts to improve the competitiveness of Arizona’s tax code.”
The other side of the equation, though, is that every tax break means less money flowing into the state treasury. But Brewer said new businesses will drive the economy, creating not just construction jobs but also permanent employment and money.
“So, in the end, everybody’s ship rises,” she said.