Legislative Wrap-up: Business

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Experts talk about the impact of the legislative session on Arizona’s business community.

Ted Simons: Many in the state's business community approved of jobs bills passed by the legislature this session. But there was divided opinion over other issues, including education cuts. Here to talk about what the legislature did or did not do for business this session is Glenn Hamer, president and CEO of the Arizona chamber of commerce and industry. Michelle Bolton, vice president of public affairs and economic development for the greater Phoenix chamber of commerce. And Lee Miller, lobbyist for the Arizona small business association. Good to have you here. Thanks for joining us.
Ted Simons: Glenn, we'll start with you. So is the jobs bill cutting corporate income tax, business property tax on equipment? Impact on business.

Glenn Hamer: It's huge. It's a game changer. That was like winning the world series. It's the largest business tax cut ever enacted in the state of Arizona. It will make us far more competitive when it comes from corporate income taxes. We'll go from middle of the pack to about the 5th best in the country. It will provide something that we've been working on for some years now in terms of reducing business property taxes to make those taxation on businesses more equitable to homeowners. It also does some other good things for manufacturers and we also are thrilled that it recreates the Arizona commerce authority. We love what Don Carden is doing with that entity and we think it puts Arizona back on the right track economically.
Ted Simons: Much of this phases in by 2014, I believe. Is that a good thing to have it phase in like that. Some folks say if it's good, have it happen now.

Michelle Bolton: Obviously, we would like something immediate but one of the other things that the business community was asking for was budget certainty and a balanced budget so the delayed effect date for the taxes helps to ensure there isn't an immediate impact on the budget and around 2014 we'll have a much more stable situation here in Arizona and be in a economic recovery and be able to take advantage the tax benefits.

Ted Simons: Was there enough in there for smaller businesses?

Lee Miller: There is. It's -- it's an excellent package. We worked closely with the governor's office and the legislature in putting it together. From our perspective, the most important things are the benefits are across the board and also apply to exists businesses as well as businesses moving into the state. There's some new efforts in there for rural development and re-engineering job training, all of those are terrific for small business.

Ted Simons: I know this is a moving target here, but there were predictions that it could lose $400 million by 2018. First of all, do you agree with those numbers?

Glenn Hamer: I don't.

Ted Simons: Talking about a moving target.

Glenn Hamer: It's a static prediction. We're -- I -- it's impossible to prove either way until we -- in to have a chance to be on the program in 2016, 2017. But reducing the corporate income tax, which, by the way is our most volatile tax. It puts in money to the state treasure when times are good and shrinks when times are tough. What we think will happen it will attract a lot of new businesses to come to Arizona, a lot of existing businesses to expand operation and those employees, those new jobs are going to be paying income taxes and sales taxes, and going to be paying parties. We think this is going to be net positive overall and certainly in terms of job creation.

Ted Simons: You mentioned stability is needed for businesses to understand what the playing field is about. Some would argue the financial instability at the government level is not necessarily good for businesses and with fewer revenues coming in, that could mean more financial instability in Arizona. How do you respond?

Michelle Bolton: One of our key messages to the legislature was let's create the stability so that businesses know what's happening and can plan for the future. Instability creates so much uncertainty when they look at other states to go and when there's instability at the state level, they think I'll hold on to dollars I have and won't hire that new employee and won't make that capital investment and really count on having that stable environment so they can make decisions for their businesses and employees.

Lee Miller: I think frankly the most challenging job down at the legislature over the next couple years is frankly to dissuade legislators from continuing to tinker with the excellent jobs bill we have in place now. We -- we know what to expect over the next couple years, but stick to that road and no matter what happens next year, but not veer off.
Ted Simons: Does that mean not tinkering in getting the new and expanded tax credit didn't make it this go-around. There was a big push for that. Leave it are alone? Try again?

Lee Miller: Well, I think one of the things we learned about Governor Brewer's approach to the legislative process is taxes and revenues need to be wrapped up in this package called the state budget and -- and once the state leaders have agreed on how many revenues are coming in and where we're going to spend them, that's the deal and let's not tinker subsequent to that.

Michelle Bolton: If I can jump in. The other thing Governor Brewer said, she'd like to take a look at property tax reform and that's something we need to talk about as a state going forward. You know, we -- we do have what -- some of the most burdensome property taxes both on real property as well as business personal property and we need to take a look at that holistically. We look forward to working with the governor next legislative session on that.

Glenn Hamer: I believe in terms of her actions, there's a roadmap on the tax items that didn't make their way through and I'm confident we'll be able to work together and come together with the package that will work and as Michelle said, it's very encouraging for her to talk about business property taxes. And the corporate income tax right now is 7%, personal income tax 4.5% and when it's phased in, the corporate income tax rate will be higher. When the business property tax is phased down from 20% to 18%, it will be considerably higher than the 10% that's assessed on residential property. Let's get to an equitable situation and then talk about the breaks for businesses.

Ted Simons: Some say if we get to tax incentives and the tax rate itself, you get there and still cutting things like education, in particular, that is not going to help business at all. Talk about education cuts and how that plays into this dynamic.

Lee Miller: The small business owners, they're -- they're the -- the success of their business is entirely reflected in how much money they have in their wallet to pay their bills. We've had a very challenging economy over the last couple years, folks have less money to pay their bills. Government, including education, naturally has to shrink to reflect that there's only so much money to go around. Sure, we'd all love to have an incredibly expansive and lavish educational opportunities available for our kids but there's only so much money to go around and we have to live within those means.

Ted Simons: I think some would for go the lavishness to go to somewhere that doesn't have a 40 in it, as far as the metrics are concerned. A lot of people are saying -- Craig Barrett, the CEO of Intel, he's not sure if Intel would decide to come here anymore. Talk about education cuts and business.

Michelle Bolton: Certainly the greater Phoenix chamber members are concerned about the education cuts. We agree with lee. The problem is we don't have -- we only have so much money to go around. We see businesses helping with their donations and having conversations with the higher institutions about how we can work together and create synergies and do more with less.

Glenn Hamer: What -- our university system is a terrific system. Jewels. Every Arizonan can be proud of and we need to make sure that the universities have the resources they need to remain excellent. Last year, I would say the Arizona legislature probably did more than any legislature in the country in terms of K-12 reform. This is not just a question about dollars, we need reform and when you talk about the state rankings, until we build on the good reforms we've done and heros in Arizona, like Dr. Craig Barrett and the schools -- this is not just a case of dollars. It's making sure we have a better functioning system so that when the dollars come in they're expended in a way that improves performance.

Ted Simons: Another major piece of legislation was pension reform. Talk to me about that and the impact on business.

Michelle Bolton: You know, obviously, we supported the pension reform package, great package, great synergies between Mr. Yarborough and Adams and creating stabilization because we know if those systems are not able it pay out benefits it's on the backs of the business community and the general tax paying citizens.

Ted Simons: Was pension reform a big thing for small businesses?

Lee Miller: What was important for small businesses was the problem gets solved so that four, five years down the road, there's not such a complete implosion and -- like the federal banking system. We've got to spend hundreds of millions of dollars route here right now to bail something out. So that certainty and long-term stability is help.
Ted Simons: Sounds like critics are saying a lawsuit is likely. I think the wording; you can't diminish or reduce state pensions. Everything that comes out of there, seems like a lawsuit is likely.

Glenn Hamer: You asked a question about education. We have to make -- we're going to have to make a choice. Are public employees, they do honorable work within we want them to be fairly paid but when you have USA today and other major publications saying a number of public employees when you include the benefits are paid considerably more than private sector and the small business people and the people paying the wages, something is out of whack. We'll need to do more, but I give cue kudos to Speaker Adams and I think at the end of the day, the important reforms that the governor signed will hold up. We don't want to go the way of Greece. We want to get this under control and the legislature took a important step in that direction this session.

Ted Simons: Letter grade, as far as small business is concerned?
Lee Miller: A.
Ted Simons: A? What do you got?

Michelle Bolton: A+ .

Ted Simons: A+? All right. Glenn?

Glenn Hamer: Well, there's always more that could be done. I'll go with an A.

Ted Simons: A? Are you expecting the same thing next session or has the heavy lifting been done?

Michelle Bolton: No, still work to be done. Some additional pushes for next year.

Ted Simons: Alright, great discussion. Thanks for joining us. We appreciate it.

All: Thank you.

Glenn Hammer:Arizona Chamber of Commerce and Industry;Michelle Bolton:VP of Public Affairs, Phoenix Chamber of Commerce;Lee Miller:Arizona Small Business Association;

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