Lawmakers defeat measure aimed at making cities pay for higher minimum wages

Two Republicans joined all Democrats on a House panel Wednesday to defeat a measure designed to make the cities of Tucson and Flagstaff pay for their higher minimum wages — but not because the GOP lawmakers like the voter-approved boosts.

Instead, Rep. David Livingston, R-Peoria, said a better approach is for the cities to repeal their minimum wage laws and even to help repeal the initiative that boosted the statewide minimum wage and allows individual cities to raise it above the state base.

That, he said, is what is driving inflation in those cities and across Arizona and the nation.

The measure from Sen. Wendy Rogers, R-Flagstaff, would have given businesses in those cities a tax credit equal to the difference between their wages and the statewide minimum wage of $13.85 per hour. For Flagstaff, that’s a $2.95 per hour difference. Tucson’s wages are set to rise to $14.25 by the end of the year.

Voters in both cities approved the increases.

Under Rogers’ plan, the state would recoup the tax losses by withholding income tax payments that are funneled to those cities — estimated by the Legislature’s budget analysts at $17 million a year for Flagstaff and $120 million for Tucson. But the state’s taxpayers would still be on the hook, since the analysis figured the business tax credit would far exceed what the state is able to hold back from the cities.

“Where the real answer is, the tough message — and this is the love part to the chambers (of commerce) — the answer is to repeal this terrible law. That is the answer,” Livingston said.

“And as far as I’m concerned, we should take it a step further,” he continued.

“Flagstaff could lead that, and then we should do a statewide repeal of the law that was passed that has increased inflation,” he said. “Because inflation is a No. 1 factor that reduces someone’s net worth and real wages.”

Rogers’ bill is championed by the local chambers of commerce and small businesses, who argue that the higher minimum wages have increased their costs to the point where they no longer want to invest in those businesses.

“This enables businesses to have some relief (from) the onerous minimum wage dictate that they have to operate under,” Rogers said. “And thus the spill-off effect is that economic recovery can take place and the community can recover and thrive.”

Senate Bill 1108 previously passed the state Senate with only the backing of majority Republicans. At the heart of the fight is the fact that Arizonans voted in 2006 to set a state minimum wage above the federal figure. They renewed that approval a decade later by a 58-2 margin, complete with a provision to allow local communities to impose their own.

Lawmakers are powerless to repeal what voters have approved. What Rogers sought to do was an end-run of sorts, creating a financial disincentive for cities to impose or keep their own higher minimum wages.

“What I like about this bill is that it does not prohibit any city who wants to decide to unilaterally raise the minimum wage,” said Rep. Justin Heap, R-Mesa at Wednesday’s hearing.

“It simply says that if a city government is going to pass on a cost by fiat to all the employers in their districts, that the city government has to shoulder some of that cost themselves,” he continued. “It actually puts a consequence for bad policy in my cities.”

But Democratic Rep. Andrés Cano, D-Tucson, called the whole Republican claim about minimum wages a false narrative.

He praised the chambers for taking on the inflation issue, which he said “is really an international and national issue” that has hurt working families. And Cano and other Democrats said they backed the notion that businesses need some relief.

“What I do not support is robbing Peter to pay Paul,” he said, by dunning Tucson $120 million for a decision made by its voters.

And Cano said that there is an answer for those who claim the higher local minimum wages are harming the local economy.

“Ask the voters … the people of Flagstaff, if they wouldn’t be OK with any initiative to take away their hard-earned resources,” Cano said.

“Put (up) a ballot referral to repeal the minimum wage and see if it passes or fails,” he said. “Don’t come to this Legislature seeking solutions that are sound bites and not solutions.”

With Livingston and Rep. Michael Carbone, R-Buckeye, opposed, the measure failed to advance out of the House committee on a 4-6 vote. Like all measures, it could later be revived, but that would require earning support from either Livingston or Carbone.

The GOP-controlled Legislature has made several attempts to penalize cities for raising their minimum wages under the 2016 voter initiative that authorized the higher wages but has so far been successful.

Their powers are limited as the state constitution bars lawmakers from directly changing the voter approved law unless they get a supermajority and if the change also “furthers the purpose” of the original measure.

Voters rejected an effort to give lawmakers the ability to make some changes just last year. But voter initiatives that enact laws that GOP lawmakers and the business community do not like still stick in the craw of many Republicans.

Rep. Travis Grantham, R-Gilbert, lamented the overall concept of a minimum wage, which mandates that businesses at least pay some set standard but are long opposed by GOP lawmakers. And his criticism went further to include any government regulation.

“I say, be very careful what you ask for because once you’re in this arena, you never get out,” Grantham said.

“Then we just regulate more and more and more, we make it more and more costly and more and more difficult and this is what we’re now figuring out with mandated minimum wages,” he continued. “Eventually, they’ll go away because the whole system will topple and everything will crumble.”