During the past few years, Arizona has done more than any state to position itself for strong economic growth once the national economy recovers. In particular, the broad-based tax reforms and new economic development tools contained in last year’s competitiveness package laid a strong foundation on which to grow the state’s economy.
With this strong foundation in place, the Arizona Senate recently took action to help existing Arizona businesses access the private capital that will enable them to grow and create jobs by passing – with strong bipartisan support – legislation that would establish the Arizona New Markets Jobs Growth Initiative (SB1301).
Modeled after a highly successful federal program established during the Bush Administration in 2000, the Initiative will help connect growth-stage Arizona businesses to sources of private capital that are not currently accessible through traditional lending avenues.
Under the program, businesses and individuals have an opportunity to “purchase” Arizona income and premium tax credits that are subsequently claimed three-to-seven years in the future. The proceeds from the purchase are then immediately invested in existing growth-stage Arizona businesses, typically as a supplement to other conventional sources of financing already in place. Importantly, the responsibility for investing the proceeds is outsourced to private sector professionals, ensuring that the government does not pick winners and losers.
Based on the experience of the federal government and the nine other states that have already enacted state versions of the New Markets Initiative, Arizona can realistically expect private investors to inject $425 million of capital into the Arizona economy within 14 months if SB1301 is signed into law.
According to an analysis commissioned by the Arizona Chamber Foundation and conducted by Elliott D. Pollack and Co., this level of investment could generate 8,000 jobs and $360 million in tax revenue to state and local governments during 10 years. At a maximum cost to taxpayers of $97.5 million, that’s $3.69 of new tax revenue for every $1 of foregone tax revenue.
When considering the merits of a tax policy change, lawmakers often ask how small businesses will benefit. In the case of the New Markets Initiative, the program aligns perfectly with the goals of many small business owners, which is for their small business to grow into successful medium or large business.
Enhancing the ability of companies to successfully make that difficult transition will pay dividends throughout the Arizona economy as jobs are created and newly employed Arizonans have money to spend at other small businesses throughout the state.
– Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry