A bill that aims to spur job growth through tax cuts to businesses and tax credits for companies that create new high-wage jobs has cleared one hurdle in the Senate, but its ultimate fate is still uncertain.
The measure is overwhelmingly supported by Republicans in the House of Representatives, but its progress in the Senate was stalled for months amid concerns that the tax cuts would harm the state’s bottom line at a time when tax revenues have already dropped by more than a third in the past two years.
Those concerns led to a major revision of the bill in the Senate Finance Committee on April 12 that stripped a tax cut for all Arizonans from the proposal and delayed the implementation of the cuts for corporate income and business property taxes.
However, the bill has not been scheduled for a floor vote, and Senate Republican leaders continue to negotiate with their counterparts in the House to make the bill more amenable.
House Speaker Kirk Adams, who sponsored H2250, has stressed the importance of attracting capital investment to the state, which he said is needed to create jobs and help Arizona’s economy recover. Since late 2007, the state has lost nearly 300,000 jobs and the unemployment rate hovers above 9 percent.
“Things won’t get better by themselves unless we do something to stimulate job growth,” he said.
But critics attacked the bill in the committee hearing, saying it merely gives money to corporations with no expectation that new jobs will be created.
“Ninety-eight percent of this bill is broad-based giveaways to corporations, regardless of whether they create any jobs,” said Dana Wolfe Naimark, a representative of the Arizona Budget Coalition, a group that supports education and social services, referring to the tax cuts.
Sen. Ken Cheuvront, a Phoenix Democrat and small business owner, said it’s the wrong time to make deep tax cuts, considering the economic problems Arizona has faced in recent years.
“Doing a tax-cut bill in a crisis seems not to be very prudent,” he said.
Some Republicans, meanwhile, are clamoring for deeper cuts that are implemented immediately, not phased in over five or more years, as the bill would do.
“I don’t think this goes far enough, fast enough,” said Sen. Russell Pearce, a Mesa Republican.
The changes to the bill, including striking the income tax cut for all Arizonans, were the result of negotiations between House and Senate GOP leaders. Although the measure was a caucus priority for House Republicans, Senate President Bob Burns and others voiced concern the tax cuts would be a drain on the state’s general operating fund during a time when revenues are already down dramatically.
Other changes include delaying the implementation of property- and income-tax cuts for businesses so they don’t take full effect until after a proposed temporary sales tax increase is set to expire. That one-cent tax increase goes before voters in a May special election and, if approved, will expire in 2014.
The so-called jobs bill also includes tax credits for jobs that pay above-average wages, establishes a new job-training program for new jobs and creates a special fund to pay for infrastructure projects needed to lure businesses to Arizona.
The bill passed the House of Representatives in January, but was held in the Senate until recently as lawmakers tackled large budget deficits in the current and upcoming fiscal years.
Legislative budget analysts said the bill would cost about $650 million annually when fully implemented in 2018. That is far less than the $942 million annual price tag the Joint Legislative Budget Committee gave the original version.
The bill was approved by a 5-2 vote along party lines; Republicans voted for the bill, while Democrats voted against it. After a constitutional check by the Senate Rules Committee, it will be ready to advance to the floor for consideration by the full body. If it is approved in the Senate, H2250 would still face a final vote in the House.
Adams unveiled the measure in January at a press conference at a Boeing facility in east Mesa. The venue was meant to highlight the kinds of employers Adams said he expects the economic development incentives in the bill to attract.
Many components in the plan are the result of a report the House of Representatives commissioned from Scottsdale economist Elliott Pollack.