Amazon-inspired bill to halt company tax incentives appears dead

Carmen Forman//March 11, 2019

Amazon-inspired bill to halt company tax incentives appears dead

Carmen Forman//March 11, 2019

Arizona lawmakers punted on the chance to address legislation aimed at preventing another bidding war like the one Amazon created among states when it sought a location for its second headquarters.

The Legislature did not take up a bill by Sen. Juan Mendez, D-Tempe, that was part of a multi-state effort to ban company-specific tax subsidies.

The Tempe Democrat’s SB 1322 mirrored legislation introduced in New York and Illinois that would have Arizona join a multi-state compact to abolish company-specific tax incentives.

In theory, the legislation would prevent the states in the compact from competing against one another by offering tax subsidies to lure companies to their state.

The legislation was the brainchild of New York state Assemblyman Ron Kim and Sen. Julia Salazar, both Democrats, who were among the first to speak out against New York’s plan to give Amazon nearly $3 billion in government incentives to locate part of the company’s HQ2 in New York City.

The multinational technology company eventually canceled plans to expand in New York after facing a strong backlash from state lawmakers, progressive politicians, activists and union leaders. Following the company’s original plan, Amazon will still build a second headquarters in Virginia, near the Washington, D.C. metro area.

Mendez, who saw New York state lawmakers talking on social media about their efforts to fight corporate subsidies, said the bidding war Amazon created among states vying to clinch the tech giant’s new headquarters riled him up.

“I recognize not all corporations do that sort of beauty pageant casting call to all the states, but that definitely was very demeaning,” he said.

Specifically, he pointed to the 21-foot-tall saguaro cactus a Tucson group sent to Amazon CEO Jeff Bezos that the company rejected and donated to the Arizona-Sonora Desert Museum. At the time, when cities and states across the country were using a wide range of gimmicks to woo Amazon, the company tweeted that the company could not accept gifts.

Arizona is no stranger to offering tax incentives to companies, although the state often keeps private many of the details of its deals. Despite the Arizona Commerce Authority submitting a proposal for Amazon to expand in Arizona, the state did not make the shortlist of states to vie for Amazon’s HQ2.

Mendez said shying away from targeted tax incentives allows the states to rebalance the negotiating table.

“Even if just one of the states does it [adopts the compact], I understand it would take a lot of us to make it work, but it would definitely send a message that the states themselves should have more respect for themselves and their workers,” he said. Shunning tax breaks and incentives is an idea with bipartisan support.

Gov. Doug Ducey, a former businessman, has derided tax breaks and incentives for businesses, but that didn’t stop him from embracing targeted incentives in a key 2015 deal to give Apple a $5 million-a-year tax incentive for building a $2 billion data center in Mesa.

Mendez’s bill was trying to get Arizona to think more broadly about economic development, but that doesn’t take into account politicians at the local level who are working to improve their cities and towns and see what a big company could do for their locality, said Sean McCarthy, a senior research analyst for the Arizona Tax Research Association.

Somebody from another city or state pointing out that’s not good state tax policy isn’t a very persuasive argument at that point, he said.

McCarthy also pointed out that proposing an interstate compact is always a toss-up, especially since no other state has already adopted something like what Mendez proposed.

“With this interstate compact, there’s always the question of will this catch on? Or are you running up a mountain by yourself?” he said. The Tax Research Association opposes targeted tax breaks, but took no stance on SB 1322 because the bill gained no traction in the Legislature.

Mendez’s SB 1322 was assigned to the Senate Commerce Committee, where it didn’t get a hearing. Committee Chairwoman Sen. Michelle Ugenti Rita said she thought there would be a lot of questions about the proposed legislation and that it wouldn’t garner enough support to get out of the committee.

Ugenti Rita also said Mendez never talked to her about the bill.

“He never lobbied or asked or inquired or sent any information, so I’m not sure it was a real big priority to him,” she said.

Mendez acknowledged he introduced the bill late in the session, which didn’t give him enough time to gin up support among key Republicans.

Mendez could still revive his SB 1322 through a strike-everything amendment.

Saying he was somewhat unfamiliar with the idea of state compacts, Mendez said he was hesitant to introduce the bill, but did so because he aimed to start a larger conversation about tax incentives.

“I understand getting a bunch of states to sign onto this is an uphill battle,” Mendez said. “We’re working years out on this kind of thing.”