Legislative Update

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A reporter from the Arizona Capitol Times will discuss the latest news from the state capitol.

Ted Simons: A tax plan from the Governor, the budget plan from Democrats, and a possible return to politics for former Senate candidate Wil Cardon. It's time for our midweek legislative update with the Arizona Capitol Times, and joining us is Jim Small. Good to see you again, Jim. A lot of things going on here. Let's start with the sales tax reform bill. Governor comes out -- first, who is pushing this in the legislature?

Jim Small: I believe John will push it, and Debbie lesgow in the house.

Ted Simons: What is she proposing?

Jim Small: This is based off of ten recommendations that came out of the tax, the sales tax simplification task force that met last year, the idea is, you know, Arizona had one of the most complex sales tax codes in the country, with different localities, collecting amounts, and just the way the whole thing is administered so the goal is to make it easier on businesses so that way, they know what they are doing and whether they are in Avondale or they are in Ajo, they know how this works out. So, there is a wide range of, of proposals, and essentially, the bill will do three things, it will deal with making the state department of revenue, the sole collector of sales tax. Give the department of revenue sole ability to audit the sales tax collections to make sure everything is collected. And it will reform a construction tax, that right now, is, is designed to let the tax money go to where the construction is happening, not where the, the materials for the construction being purchased.

Ted Simons: And that's interesting because isn't that one of the reasons that a major reason that cities and towns, they are not happy about this?

Jim Small: Yeah, and that is really kind of a controversial thing. It's something that they have not been happy with since the recommendation were released, and their fear is that, is that by taking say, you know, you are taking the sales tax revenue away from maybe a city like Prescott, where contracting supplies are bought in Phoenix but used in Prescott, that money, from that sales tax, have designed to help with the infrastructure. So that way the roads and the sewers and things like that, and they are afraid by saying ok, Phoenix is going to get that money, going to collect that money, they are going to end up losing out and get hurt. The counter argument is that state will be collecting more because there won't be any cheats, and people will not be able to buy something tax-free and not report using it and pay that tax later. And there will be a bigger pot of the money that's split up amongst cities so you can add more money, which means the cities are going to end up getting more money back.

Ted Simons: Provided that they get the money, and revenue-sharing exists, which is another topic all together. And yet it, seems as though the idea of, of buying something out of state even or buying something out of country, that kind of brings up the internet tax thing, too. How does that go into this dynamic?

Jim Small: Well, right now the internet tax thing is not really addressed so much because, because the, you know, the biggest stuff during that was Amazon, and the department of revenue and Amazon reached a deal where Amazon agreed to, to pay sales tax. So, there are other outlets that, that may be are not affected by that deal with Amazon but because they are the largest company and, you know, the states, Amazon owed 50 million in back taxes, and that really takes care of the lion's share of that, and the hope is that the Federal Government will step in on that regard and pass a, a national online sales tax thing that, that tells companies, ok, here's how you have to handle this.

Ted Simons: I guess the idea, the point of purchase if it's outside, prescott could worry about whether the construction is going on, in prescott or purchased in Phoenix. But, if it's purchased in New Mexico or Texas, nobody is going to get that unless something is ratified here, correct?

Jim Small: Well, yeah, and I don't know, necessarily, how common that really is. I think that more often --

Ted Simons: That's true.

Jim Small: More often than not even if it's a trust, you know, put together in New Mexico, might be sold through a distributor in Phoenix.

Ted Simons: So how much traction has this got? Cities and towns fighting it, do they have enough push to do anything about it?

Jim Small: We'll see, the bill has a lot of sponsors, bipartisan support, at least in concept, and even some of the, some of the Democrats supporting it, you know, we talked to a number of them, and they said, you know, we support the idea, and we want to see the thing move forward and we're supportive of refining our system and making it easier to navigate. But, at the same time, that construction is one that, you know, they are not necessarily onboard with and even though they may be a sponsor of it, and if there are not changes made that they may not vote for it. And the Governor's office has said that she is willing to, to negotiate, you know, everything and, and if they can find a way to make that tax easier to manage, you know, without harming the cities and the states, I think they will try to find that.

Ted Simons: And you mentioned the Democrats, house Democrats released a budget plan for fiscal year 14. Somewhat similar to what the Governor is looking at?

Jim Small: Somewhat, and calls for more spending in areas that are important to the democrats and, you know, the social programs and, and K-12 things and programs like that, and the biggest difference between, between it and, and the Governor's proposal is that, that it funds the increased spending by getting rid of tax credits that are on the books. And you know, something that, that, the house Minority Leader Chad Campbell had talked about when he unveiled his anti-school violence legislation before the session began. Getting rid of the main tax credit would be the, the school tuition tax credit, 55 million a year, and one of those bedrock core Republican programs, so, the idea that, that it is put out there in the budget, I think, just tells you everything that you need to know about the politics of the situation, and really, the likelihood this will get considered seriously.

Ted Simons: Indeed, it sounds like, although this, it was interesting their budget did include, also, that inflation adjusted funding for education. No one else's budget seems to have gotten there yet.

Jim Small: That was a ruling that came out during the very first week of the legislative session. It came out after the Governor's office had really prepared their budget. They were putting the finishing touches on it so they weren't able to incorporate that, and that's going to be litigated and go to the state supreme court.

Ted Simons: Before you go, Wil Cardon says he's returning to politics. This is after he lost, and rather handily to Jeff, but he's not returning to elected office. What's going on here?

Jim Small: Yes, I talked with him the other day, and you know, he wants to get involved -- back in Arizona politics, and in a, in a -- some kind of effort that really is not well defined but, the idea would be to go after the Republican establishment, and the people that he views as career politician, the folks who go into office and, and abuse the voter's trust and turn around and use their office for personal gain, while in office are later in life, and so that's, that's the idea. It's a similar theme to what ran in his campaign where they tried to paint Jeff flake as an establishment Republican, and you know, hand picked by party leaders.

Ted Simons: This is the same man who spent, 6 million, something like that, of his own money in that campaign. And so, how much pull does he have in the GOP circles?

Jim Small: He Got 29% of the vote. Something like that. And he certainly didn't show, didn't farewell at the polls. He did have certainly his own, you know, loyal group of supporters. And, and there are certainly a group of Republicans who, who don't like the quote/unquote establishment, you know, however that's defined. So, there will always be, I think, an audience to speak to, but I think what impact he'll have depends on what sort of path this takes, whether, you know, and who gets involved, and I think we're still too early to tell that.

Ted Simons: All right, good stuff. Thanks for joining us.

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