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Business groups press for permanent tax repeal

Business groups are continuing to pressure state lawmakers to permanently repeal a property tax they say would add to one of the highest commercial property-tax burdens in the country.

The push to permanently repeal the so-called education equalization tax comes despite Arizona's struggles with its mounting state deficit. The tax could raise roughly $250 million in the upcoming fiscal year. Bit it is expected to be a key political bargaining chip as lawmakers look to fill a deficit of nearly $3 billion in the budget year that begins July 1.

The tax has been suspended for the past three years but is scheduled to automatically return on July 1.

Its return would be costly to the state's largest landowners, although the increase on the average homeowner would be relatively small, only about $58 a year on a house priced at the current median of $176,200.

Tax relief has exceeded $140,000 annually for the largest business properties on a list of records complied by The Arizona Republic. Owners of the 50 most valuable business properties, such as Scottsdale Fashion Square, Arizona Mills, Target and Intel Corp., had savings of at least $34,000 each during the past three years, according to The Republic's calculations.

The tax, if levied, would represent between 3 percent and 4 percent of a landowner's total property-tax bill, according to the Maricopa County Assessor's Office.

The battle to make its repeal permanent is a key part of business groups' fight to reduce taxes to increase investment.

The Arizona Chamber of Commerce and Industry is among 21 business groups that have asked lawmakers to permanently repeal the equalization property tax.

”It's impossible to see how any positive employment effect occurs if the largest property-tax increase comes back during a deep recession. It will cost jobs. I can't tell you how many. But businesses that are already stressed will be more so,'' said Glenn Hamer, the chamber's chief executive.

Supporters of letting the tax go back into force say it would be foolish to repeal it given the state's massive deficit.

One group adamantly opposed to having the tax repealed is the 34,000-member Arizona Education Association.

”As we talk to citizens about the crisis of this deficit and see how it will impact students, most would pay $55 a year so kids keep quality teachers in the classroom,'' said John Wright, president of the teachers union. ”It's time to tell businesses that realized $140,000 to $150,000 in savings that we can't afford to give this right now.''

The equalization tax went into effect 1981 and was designed to more evenly spread the burden of funding public schools in local communities.

It was suspended three years ago, when the state was flush with cash, as part of a budget deal between then-Gov. Janet Napolitano, a Democrat, and the Republican-controlled Legislature.

Lawmakers have used general-fund dollars to replace the $675 million in lost equalization property taxes for the past three years, so schools got the same level of funding.

The average annual savings for a typical Maricopa County homeowner during that time was nearly $55. Businesses have received larger savings because their properties are bigger, worth more and are assessed at more than double the rate of homes.

Getting the tax permanently repealed has been a goal of the Republican-controlled Legislature for the past two years. Napolitano vetoed legislation to do so last year, saying the state couldn't afford it.

Republican lawmakers expected an easier time this year after Republican Gov. Jan Brewer took office. But legislation has stalled in the House as budget negotiations drag on the governor.

Minority Democrats are advocating that the tax come back on the books for fiscal 2010, saying the state needs the money during its financial crisis.

”This was a (tax) suspension that was never intended to become permanent,'' said Rep. Chad Campbell, D-Phoenix.

House Speaker Kirk Adams, R-Mesa, said those wanting to bring the tax back are ”missing the big picture.''

”Arizona's economy needs to grow jobs, not lose jobs. This is a job-killing tax,'' Adams said. ”This is not a tax cut. The cut was made three years ago. This is a lack of an increase, and we are trying to prevent that increase.''

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