Tax reduction is not at top of Chamber's list

2013-01-14T00:00:00Z Tax reduction is not at top of Chamber's listHoward Fischer Capitol Media Services Arizona Daily Star
January 14, 2013 12:00 am  • 

PHOENIX - For the first time in recent memory, getting the state to cut taxes is not at the top of the legislative agenda for the Arizona Chamber of Commerce and Industry.

In fact, you'd have to dig deep into the organization's wish list to even find a specific proposal for the state legislative session that begins today. And that one deals with a unique tax paid only by the insurance industry.

Glenn Hamer, the chamber's president, acknowledged that tax relief has been at the forefront for years. But he said it's now time to take a break.

"We feel as a state we've made more progress than any other state in the country when it comes to improving our economic competitiveness," Hamer said. That is borne out, he said, by recent reports showing the unemployment rate dropping and Arizona near the top of all states in creating new jobs.

"The economy is starting to fire on all cylinders," he said. Hamer said while some of that reflects an improving national economy, a lot is Arizona-specific.

What that means, he said, is focusing inward. And Hamer conceded that may even involve spending more money, especially on education.

Hamer said the chamber is pleased that Arizona is moving forward with adopting Common Core educational standards.

The idea is to align what Arizona requires students to learn in English and math with what is being taught across the country.

At the very least, that will mean the achievement levels of Arizona students can be directly compared with other states. Now, the main test used here is AIMS - Arizona's Instrument to Measure Standards - which is based solely on goals prepared for students here.

Hamer also promised to pursue funding for "proven educational reform items," notably the mandate that requires students to be reading at a third-grade level before being promoted to the fourth grade.

Gov. Jan Brewer had sought $50 million to begin implementing the plan but accepted $10 million less after the Republican-controlled Legislature proposed no new cash at all. Hamer said the chamber is committed to lobby this year for whatever the governor says is necessary.

"Third-grade reading is really one of those turning points for a lot of students," said Suzanne Kinney, the chamber's vice president of public policy. "If they don't know how to read, then they can't continue to learn."

Hamer acknowledged, however, that the chamber is not proposing any increase in state revenues to pay for programs like this.

The issue of funding, particularly for education, is likely to become critical next fiscal year.

That's because the temporary 1-cent-per-dollar state sales tax voters approved in 2010 self-destructs at the end of May. A plan for a permanent replacement, advanced as Proposition 204, was trounced at the polls, at least in part because of opposition from the chamber and other business interests who supported the 2010 measure.

At this point, though, the chamber has no thoughts about an alternative source for the $1 billion a year being lost.

"We do think there is enough money within the system, at least for the next couple of years, to fulfill the different reform requirements," Hamer said, promising an "open mind" to new taxes.

One of the first needs may be for "soft capital," a category that includes books and computers. The latter are necessary for the kind of systemwide testing the Common Core Standards mandate.

Brewer sought $100 million for soft capital; lawmakers provided none.

The one key bit of tax relief the chamber is seeking is for the insurance industry.

Arizona's current corporate tax rate of slightly less than 7 percent is set to drop to 4.9 percent by 2017. By contrast, insurance companies pay a premium tax of 2 percent.

But that tax rate is on revenues rather than income. According to chamber analysis, that can translate into double-digit tax rates if the levy were computed on income instead.

Hamer said the chamber would have that reduction phased in to result in "little to no disruption" in overall state revenues.

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