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Governor unveils plan of tax cuts for business

Gov. Jan Brewer, with newly appointed Commerce Authority head Don Cardon, said she plans on "streamlining" the state university system.

PHOENIX - Gov. Jan Brewer proposed an ambitious package of future tax cuts for business Tuesday - cuts she said are necessary to improve the state economy.

Eileen Klein, the governor's chief of staff, said Brewer wants lawmakers to approve the package when they convene in January. But she said the governor doesn't want them to take effect until 2013 to coincide with the expiration of the temporary 1-cent sales-tax increase voters approved earlier this year.

In the meantime, Brewer said she intends to trim even more state funding from the three universities. That comes even as Don Cardon, whom the governor named Tuesday to head the Arizona Commerce Authority, said the state needs to be looking at the schools as a key to economic development.

Klein said Brewer wants a sharp cut in the state's corporate income tax. That rate is now close to 7 percent; Klein said it should be cut to about 5 percent.

But the cut would be even deeper for some firms. Brewer wants to allow manufacturers whose products are sold mostly in other states or countries to all but escape paying any Arizona corporate-income taxes.

Brewer also wants to reduce the property taxes businesses now pay, largely to schools and local governments.

One problem with that is when businesses pay less, the burden generally gets shifted to homeowners.

The governor said her "goal" is to keep that shift from occurring.

But neither Brewer nor Klein would explain how that could be accomplished. And the governor refused to say she will veto any tax package that ultimately means homeowners pay more.

"It won't happen with my blessing, that's for sure," the governor explained. "Certainly, I have a Legislature I have to work with."

The outline of the tax plan came as Brewer announced Cardon's choice to head the Arizona Commerce Authority. Cardon, outlining his ideas on economic development, said the state needs to reconsider how it treats its universities.

"If we're going to mature as a state, we have got to get to a point where we look at our universities and we look at research and development not as a liability, not as an environment where the elite reside ... but where our hope rests in a knowledge basis necessary in a global economy that's expanding," he said.

That's not going to happen, at least not this coming budget year. In fact, Brewer said she will be "streamlining" the schools, reducing their state aid.

"We will work to get a bigger bang out of our dollar," Brewer said. "We will try to do as little harm as possible."

Of some note is Brewer's plan to change how multistate corporations compute what they owe in Arizona income taxes.

Under current law, these firms pay Arizona taxes based 50 percent on sales within the state, 25 percent on the value of their property and 25 percent on the amount of their payroll.

Lawmakers agreed several years ago to let corporations elect an alternative based 80 percent on sales. That benefits manufacturers of things ranging from computer chips to missiles whose customers are elsewhere.

Brewer's plan would up that to 100 percent. So a company with no sales in Arizona would owe nothing in state corporate income taxes.

Klein, the governor's aide, said the move is necessary to lure those firms here.

"Those companies could be located anywhere," she said. And Klein said there still would be a net positive to the state.

"They tend to create a lot of jobs," she said, people who will then pay individual income taxes on what they earn and sales taxes on what they buy.

Other key elements in the governor's economic development plan include:

• Creating a "deal closing fund" for the government to provide cash to companies willing to expand or relocate here.

• Expanding the tax credits available to corporations that conduct research and development in Arizona.

• Eliminating capital gains for investments made in small businesses.

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