State senators on Tuesday rejected the one tax break sought by Gov. Doug Ducey in his State of the State speech.
Four Republicans lined up with the 13 Senate Democrats to quash the idea of exempting military pensions from the state’s income tax.
None of the Republicans explained their decision during the vote. But Sen. J.D. Mesnard, R-Chandler, is pushing an alternate set of tax breaks, ones that would give broader relief to individuals and businesses.
“I generally oppose carve outs,” he told Capitol Media Services after the vote.
Sen. David Farnsworth, of Mesa expressed similar sentiments.
“When we make policies they need to be broad and affect everybody,” he said. “Any time we carve out any segment it shifts the load to everyone else.”
Ducey press aide Patrick Ptak said his boss is not deterred by Tuesday’s vote – or the fact that four members of his own party refused to go along.
“Because this is included in the governor’s budget package, our expectation is that it will be enacted as part of the final budget rather than as a stand-alone bill,” he said.
Tuesday’s vote is the second setback in a week for the governor in getting the priorities from his State of the State speech enacted.
Late last week Ducey had to give up on his call for lawmakers to put a provision into the Arizona Constitution forbidding cities from having policies which preclude law enforcement from cooperating with federal immigration officials. The governor found himself not only short of votes but facing opposition from the business community concerned about how putting such a measure on the November ballot would affect the state’s image and its ability to land conventions and conferences.
Arizona law currently exempts the first $3,500 of any military pension from state income tax. Ducey proposed removing that cap entirely — at a cost to the state of $43 million a year — calling it a matter of economic development.
“We have a goal: to make Arizona home base for veterans everywhere in the country,” he said.
Sen. Sonny Borrelli, R-Lake Havasu, who retired from the Marines after more than 20 years, echoed that theme Tuesday in trying to line up the votes for SB 1237.
“This encourages these vets to stay here, lay down roots, move and escape from other crazy states like what I did from California,” he said. And Borrelli said this isn’t necessarily a net loss of taxes to the state.
“I bought a house,” he said.
“I paid property taxes which goes to my local school,” Borrelli continued. “Everything I spent was taxed and went to the local community and even to the state” in sales taxes.
But Sen. Andrea Dalessandro, D-Green Valley, said she doesn’t see it that way.
In fact, she argued, cutting revenues actually can work against those who have retired from the military. She said that means less money going into the education of people who will provide them the health care they will need.
“That is really more important to me that they have someone to take care of them,” Dalessandro said.
And Sen. Jamescita Peshlakai, D-Window Rock, said the proposal would benefit only those with military pensions, not anyone who is a veteran. More to the point, she said it actually helps only those who retired as officers – with higher pensions.
Borrelli effectively conceded the point.
He said the average rank for an enlisted person after 20 years in the military is E-7, with a pension of less than $24,000 a year.
What makes that number significant is that Arizona already provides a $12,000 deduction from income for single people and $24,000 for couples. So that means an enlisted person who is married already has an exemption equal to his or her military pension.
What that leaves, Borrelli said, are folks like retired lieutenant colonels.
Sen. David Gowan, R-Sierra Vista, the prime sponsor of the legislation, told colleagues they need to look at the issue through more than the lens of lost state revenues.
“I’ve not served in the military at all,” he said.
“I do sponsor this bill in tribute to (those who) actually go out and sign their name on a dotted line to say, ‘I am willing to die for your freedoms today,’ ” Gowan said. “We can give back to them.”
Anyway, he said, they earned their pension not in Arizona but abroad, though there is nothing in the proposal specifying where they served and whether it was overseas.
Gowan is not giving up, using a procedural maneuver that would allow him to make another bid to line up the 16 votes in the 30-member chamber to resurrect the issue.