There’s a flip side to the decision by the two top taxwriting lawmakers to focus their attention on reducing business property taxes: Other tax cuts become less important.
And that’s bad news for some of the state’s largest employers who have been hoping for a major change in the corporate income tax structure.
Rep. Steve Huffman, R-Tucson, and Sen. Dean Martin, R-Phoenix, said there will be multiple tax-cut proposals introduced this year. They may even sign on as sponsors.
But Huffman, chairman of the House Ways and Means Committee, and Martin, who heads the Senate Finance Committee, said the best chance of getting something done is to concentrate on one small change rather than trying to fix everything at once.
"Completely changing the system is the Hail Mary pass,’’ Martin said.
"Hail Mary passes don’t work that often,’’ he continued. Instead, quoting Vince Lombardi, he said that tax reform — like football — is "a game of inches.’’
So what falls off the table?
The big issue is altering the corporate income tax structure to benefit some multistate corporations.
Companies that do all their business in the state compute their taxes based on their income.
But multistate corporations use a formula based 50 percent on the sales that occur in Arizona, with 25 percent for the share of payroll in the state and an identical percentage for the proportion of corporate property in Arizona.
Lawmakers have debated tinkering with the formula, even to the point of allowing companies to determine their Arizona corporate income taxes based solely on what percentage of total sales occur here. That would mean that corporations that sell most or all of their products elsewhere, such as chip makers Intel and Freescale, would be able to make their state income taxes virtually disappear.
Huffman said the problem with the current formula is that a corporation that expands in Arizona, either with more employees or more equipment, ends up having to pay more in state income taxes.
Altering the law, he said, removes the negative tax consequences for creating jobs and expanding capital in Arizona. He said the change is a good idea. But he said spending effort on that only reduces the odds for getting broadbased reductions in business property taxes.
Jim Norton, director of the Arizona Association of Industries, said he is not surprised that Huffman and Martin are not going to push for the change in the corporate income tax formula.
"We have to analyze what’s going to have the possibility of reaching the governor’s desk and put our efforts behind that,’’ said Norton, whose organization represents many of the high-tech firms that would benefit from the change.