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1 Joseph Henchman & Josh Barro, Arizona's Special Interest Laundry List 1 (2008)

handle is hein.taxfoundation/ffbdbxz0001 and id is 1 raw text is: June 24, 2008 No. 131 Arizona's Special Interest Laundry List By Joseph Henchman &Josh Barro Last week, Arizona state representatives unveiled a raft of proposed subsidies and special tax breaks for favored industries. Typically, with packages of lobbyist-driven handouts such as these, the actual value to state residents is inversely proportional to the sponsors' soaring language regarding their benefits. So when Arizonans are told that the package's effects will be bringing in new manufacturing jobs, revitalizing urban areas, attracting tourists, maintaining or expanding the Cactus League and stabilizing the construction market, they should check to make sure they are still in possession of their wallets. The Arizona State House's press release announcing the proposals grandly reports that no current general fund money would be used for the projects. Technically, that's true. However, the difference between the government (1) collecting a tax and then cutting a check to a favored business, or (2) exempting that favored business from a portion of its tax liability, is a difference in accounting only. These programs will impose significant costs on Arizona's general fund in the form of tax revenues foregone. In many cases, the special tax benefits will go to businesses or projects that would have existed with or without the new laws, representing a true loss of otherwise-collected revenue. The four main planks of the proposal are: Tax breaks for manufacturers of solar energy components. Manufacturers would receive a transferable (and therefore, functionally equivalent to a refundable) credit against income tax for 10% of business investment. *Expansion of the state's existing Research & Development tax credit. The credit would go from 20% to 24% on expenses up to $2.5 million, and from 11% to 15% on expenses above $2.5 million. This increase is expected to cost the state treasury $11.2 million per year. *A special 0.75% tax on hotel rooms, restaurants and rental cars in Pima County (Tucson). This tax, subject to approval by Pima County voters, would be used to subsidize spring training facilities used by Major League Baseball teams.

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