Arizona has an opportunity to keep building on the Arizona Comeback. We can continue to diversify our economy through strategic choices that help our state retain, expand and attract investment from industries with high wage jobs for Arizonans.
In 2011, manufacturing accounted for 8.4 percent of Arizona’s Gross Domestic Product, according to Arizona Indicators. Today there are about 4,500 manufacturers of all sizes in Arizona. While holding only a single-digit slice of our GDP, the manufacturing industry creates 86 percent of our state’s exports, according to the Arizona Sonora Manufacturing Initiative. Further, according to the ACA, one manufacturing job in Arizona supports another 1.29 additional jobs. That’s a value-added industry at work—one that creates jobs for working Arizonans, building up Arizona as a creator and exporter of goods.
Arizona has manufacturers that produce and sell goods across the state, the nation and the globe. These manufacturers are a part of several key industries and provide jobs in aerospace, navigation, engineering and research and development to name a few. Making our state more competitive for manufacturing businesses has the potential to increase our export economy while providing jobs for Arizonans and products for the world’s consumers.
Arizona’s existing manufacturers include large companies such as Honeywell International, food makers such as Bluebell Ice Cream and home-grown producers like Valley Machine Works, which has been doing business in Phoenix since 1909.
Today, Arizona remains one of a minority of states that still taxes electricity used by our manufacturing facilities. That’s right, sales tax is charged on the electricity used in the manufacturing process, while other consumables and materials used in the same processes are not.
Competition for the jobs and investment this industry brings with it is tight. Our current unequal tax treatment limits our ability to grow the Arizona manufacturing sector—an industry that creates high quality jobs with, according to the Arizona Commerce Authority, an average wage of $69,964.
The first step is to be competitive with our rival states. Senate Bill 1413 would align Arizona’s tax policy to that of a majority of other states that exempt the use of electricity by manufacturing facilities from sales tax. This policy alignment will support efforts to further diversify our economy by building on our manufacturing industry in Arizona and, in turn, increasing our exports—making Arizona a real competitor for manufacturing businesses and deepening the impact of this value-adding industry.
Changing how the state taxes manufacturers will remove a barrier to business attraction, expansion and retention. This can lead to more skilled jobs for working Arizonans, a stronger more diverse economy and the opportunity to further our state’s role as a creator and exporter of goods.
Manufacturing is experiencing a comeback in the United States. Arizona can be a part of it. Let’s continue the Arizona Comeback and support the creators and innovators that develop, produce and supply goods vital to the 21st century.
- Chad Heinrich is vice president of the Greater Phoenix Chamber of Commerce.