Group renews push for tax limits in Arizona

Arizona Capitol Times
Tuesday, December 17, 2013
Luige del Puerto

After three failed attempts, a group that is seeking California-style property tax limits in Arizona is preparing for another push to get the question on the 2014 ballot.

The organization has dropped its old moniker – Prop 13 Arizona – in favor of a new name: EZ Property Tax. It has also secured the help of conservative stalwarts, including former state Sen. Russell Pearce and former Republican state party chairman Randy Pullen.

What has not changed is the group’s ultimate goal – to prevent wild swings in property tax bills, especially when valuations skyrocket, and to keep property taxes low.

Lynne Weaver, chairwoman of EZ Property Tax, said the initiative, if successful, would cap residential property taxes to half a percent of their value and would limit all other types of property taxes to one percent of their value. It will use the 2012 or 2013 property valuations – whichever is lower – as its base.

Additionally, the proposed initiative would cap property valuation increases to two percent annually. Prop 13 has been chasing this goal for the last seven years.

But in addition, EZ Property Tax proposes to eliminate all personal property taxes, including businesses’ personal property tax.

“That will certainly stimulate economic growth here, and we hope that it will bring in manufacturers, who will create good, blue collar jobs,” Weaver told the Arizona Capitol Times.

To qualify, the group needs to submit 259,213 valid signatures to the secretary of state by July 3 next year.

But critics said the proposal would lead to the unraveling of the state’s public finance system.

“It is a nuclear ordnance on the state’s public finance system,” said Kevin McCarthy, president of the Arizona Tax Research Association.

The caps on residential and commercial property taxes alone would mean a “dramatic reduction in property tax collections,” he said, noting that the effective tax rate in 2012 for commercial and industrial properties is 2.24 percent, and 0.99 percent for owner-occupied residential properties.

The new provision to eliminate the tax on all real property, such as machinery, farm equipment and computers is misguided, he said.

Arizona laws distinguish between locally-assessed and centrally-assessed real property, but the initiative would eliminate the tax on both, which means that it would also delete the taxation on personal property owned by utilities, railroads, pipelines, and mines, McCarthy said.

“Essentially, what they would be doing is eliminating most of the tax liability for some of the biggest companies in Arizona,” he said, adding that some of these firms are the major source of revenue for many rural local governments and schools.

Others are skeptical that the group would succeed after having successively failed in the last several election cycles.

To be safe, the group likely needs 30 percent more than the minimum signature requirement or at least 337,000 signatures.

Andrew Chavez, owner of the signature-gathering company Petition Partners, said that’s doable.

But Chavez doubts whether EZ Property Tax can secure the main ingredient for success: money.

He said the group will need at least $500,000 for the signature-gathering phase.

“A constitutional amendment by this volunteer group with no money is not going to happen. A constitutional amendment in February with some money is not going to happen,” Chavez said, adding the initiative has to be fully funded to get on the ballot. “This group has never had access to money – never.”

The fate of Proposition 116, which got clobbered in the polls last year, offers a cautionary tale to supporters of EZ Property Tax.

Prop 116 sought something that is more measured: a tax exemption for $2.4 million of business personal property. The current exemption is about $68,000.

While the measure encountered virtually no opposition, voters rejected it by a wide margin, 43 percent to 56 percent.

Prop 116’s supporters didn’t raise a lot of money to push the issue, and some admitted that the initiative was confusing.

Additionally, the record of success for citizens-driven proposals to amend the state Constitution is spotty.

In the last 20 years, only 13 such initiatives have made it to the ballot.

Last year, only one such question – Prop 121, the so-called “jungle” primary – was on the ballot. None made it in 2010.

And once on the ballot, the chances of winning don’t improve. Of the 13 constitutional questions decided by voters since 1992, only six became law.

But Weaver’s group is undaunted.

She said the signature drive likely will begin in February, once it has secured sufficient funds.

The initiative’s launch was hosted by Scottsdale businessman John Dawson, who has generously contributed to conservative causes and to the Republican Party.

Last year, Dawson contributed $25,000 to help defeat a ballot measure that sought to permanently keep a one-penny increase in the sales tax rate. He also gave $25,000 to an independent expenditure group, Arizonans for an Honest Government, which spent thousands to boost former senator Lori Klein’s failed primary bid for the House.

Weaver insisted that the initiative won’t have a dramatic impact on revenues.

“This is not a big tax cut. This is using 2012-2013 valuations. Those are very recent, and [it proposes] a small reduction in the total tax rate… It’s tax certainty and security going forward,” she said.