Arizona business property taxes are high and lowering them would be economically productive.
But it seems that lawmakers are mostly looking at bad ways to do a good thing.
The problem is Arizona's complicated property tax system. All property is appraised at its market value. Property tax rates, however, are applied to 25 percent of that value for businesses, but only 10 percent for homeowners.
As a result, Arizona has relatively low residential property taxes, but among the highest in the country for business.
This disparity also attenuates accountability in bond and property tax override elections. Most of the cost will be paid by businesses, not directly by the people voting on them.
In the past, the favored solution was to tax all property at the same percentage of its market value for bond and property tax override elections. But this would cause a shift in paying for them to voters, and legend has it that at least a few legislators have been defeated in part because of their support for the proposal.
The incoming chairmen of the tax committees in the Legislature outlined new approaches before an Arizona Tax Research Association conference last month.
In addition to being taxed on a smaller percentage of their property value, homeowners are also provided a rebate of 35 percent of their school district property taxes for operations. That will cost the state about $280 million this year.
Senate Finance Chairman Dean Martin, R-Phoenix, proposes to let business in on that gravy train, for the state to subsidize business school district property taxes as well. That, however, would not reduce the disparity - and consequent reduced accountability - in bond and property tax override elections.
House Ways and Means Chairman Steve Huffman, R-Tucson, would partially address that oversight by gradually reducing the business taxable value from 25 percent of market to 20 percent. To offset the tax shift to homeowners, Huffman would increase the homeowner rebate.
The problem with both approaches is that, by expanding the rebate program, they make Arizona's property tax system even more complicated and less transparent.
If business property taxes are to be reduced by increasing state aid to education - which is essentially what both Martin and Huffman are proposing - a cleaner approach would be to simply lower the property tax rate used to calculate state aid itself. That way, property tax rates would be real, rather than artificially high just to be subsidized by the state.
Martin and Huffman's proposals at least have the virtue of treating all businesses alike. The same cannot be said for some tax incentive ideas that Barbara Leff, R-Paradise Valley, plans to advance next session as chairwoman of the new Senate Commerce and Economic Development Committee.
Leff, ordinarily a sensible legislator, has fully bought the incantations of the high-tech shamans. According to the Arizona Capitol Times, she proposes tax credits for early investments in selected industries, such as biotech.
Leff even claims that, since investors will decide which specific companies in the favored industries get the money, government isn't really choosing winners and losers. But this is an obvious intellectual dodge.
The purpose of such proposals is to move capital to politically-preferred ventures they would not otherwise attract. The effect is to reduce the availability and increase the cost of capital for other businesses.
If the investment climate in Arizona is to be improved, the even-playing-field approach would be to increase the returns for all investments by lowering individual and corporate income tax rates.
Frankly, it's hard to make the case that Arizona's economy needs a kick-start. Since 1999, Arizona has ranked fourth among the states in personal income growth, and second in employment growth.
Contrary to myth, this has not been just low-wage job growth. In fact, Arizona wage growth per job has outpaced the national average.
There is, however, room to make Arizona's economic climate even better, and tax increases approved since 1998 are worrisome.
To the extent lawmakers want to work on improvements, there are a couple of solid principles for guidance: Include everyone, and don't play games. Just reduce rates.