Despite slashing state spending by $1.2 billion last month to cope with flagging tax collections, lawmakers are mulling a proposal to give massive tax cuts to Arizona businesses.

Rep. Rick Murphy, the chairman of the House Ways and Means Committee, said his intention was to foster a discussion on the issue of comprehensive tax reform and not focus on the individual components in his legislation.

"The point was to be able to have the wide-ranging discussion of fundamentally reforming our entire tax structure," he said.

Essentially, the measure would exempt small business owners from paying taxes on their commercial property. Any business with total property worth less than $10 million would be exempted from the tax. Right now, the threshold to qualify for the exemption is $65,000.

The measure, H2368, was introduced as a strike-everything amendment in the House Ways and Means Committee. The omnibus tax reform amendment also sets the stage for a series of annual reductions to the corporate income tax rate through 2011, though the specific reductions were not provided.

Legislative staff told lawmakers that a one-percentage-point cut would amount to about $80 million.

The amendment also would allow all Arizona taxpayers to deduct 57 percent of any capital-gains earnings from their taxable income when filing their state taxes.

The committee did not vote on the proposal.

Steve Voeller, president of the Arizona Free Enterprise Club, said the silver lining of the struggling economy is the opportunity it gives policy makers to examine the state's tax code to promote long-term economic growth.

"I think now is the time to really assess Arizona's tax system," he said.

Murphy said Arizona is poorly positioned to compete with other states in the region because of a heavy corporate tax burden.

"Right now, we are in a very non-competitive position," he said.