I began this blog in May 2009 following the death of Marcia Powell at Perryville State Prison in Goodyear, Arizona. It is not intended to prescribe the path that leads to freedom from the prison industrial complex.

Rather, these are just my observations in arguably the most racist, fascist, militaristic state in the nation at a critical time in history for a number of intersecting liberation movements. From Indigenous resistance to genocidal practices, to the fight over laws like SB1070 and the ban on Ethnic Studies, Arizona is at the center of many battles for human rights, and thus the struggle for prison abolition as well - for none are free until all are. I retired the blog in APRIL 2013.

Visit me now at Arizona Prison Watch or Survivors of Prison Violence-AZ

Monday, November 21, 2011

To the 99%: Wake Up! Corporate Welfare reigns in Arizona...

While the rest of us are now taxed for food to fund our schools and pay our firemen, and hundreds of thousands of Arizonans have been cut off of AHCCCS, these jokers slide right on by....So whose interest is our legislature and governor acting in, if not ours?

-----------------from the Arizona Republic-------------

Arizona tax cuts greatly benefit corporations

Every year, about two of every three Arizona corporations pay almost no state income tax.

But that hasn't deterred the state from cutting business taxes for two decades and now embarking on more generous tax breaks in coming years.

The tax cuts reflect a strategy by lawmakers to lure other businesses to Arizona, especially high-tech ones, by lowering the costs of doing business here to better compete with other states.

graphic Interactive graphic: Shrinking tax bill | Tax quiz

But the corporate gains may come at a price. Unless enough new businesses arrive, the declining share of corporate taxes could require individual taxpayers to pay more or the state to slow its spending amid persistent population growth.

The Arizona Republic examined 15 years of state corporate income tax data, legislative tax records, tax court cases, committee reports and figures on state business tax credits. Among the key findings:

Each year, anywhere from just under two-thirds to nearly three-fourths of Arizona businesses that file state income tax returns pay only a token amount, the $50 minimum. Those include successful firms that use deductions and credits to entirely erase their profits, giving them no taxable income. Many others are small companies that just lose money. This trend has held true each year through good times and bad, from at least 1994 through 2008.

Arizona's corporate income tax rate is set to fall by 30 percent from 2014 to 2017 and could end up one of the lowest in the nation. The decrease will save businesses an estimated $270 million in taxes over the four years. That's greater than the amount cut by lawmakers from K-12 education and Arizona State University in this year's budget.

The state gives national companies one of the nation's most generous methods for calculating how much income is subject to state income tax. Changes to that formula were made in 2005 at the urging of Intel Corp. and other companies and business groups. The changes have already sliced state revenue by more than $86 million. New changes to the formula could cost the state another $84 million by 2018.

Use of corporate tax credits in Arizona has soared since 1994. The state now offers more than two dozen credits aimed at growing or attracting certain industries. More than half the $80 million in annual credits goes to businesses that make large profits, nearly all based outside the state. The state has approved new business credits worth about $55 million.

The issue of who pays taxes, and how much, has sparked a heated debate across the country as states and the federal government struggle with cutbacks in services, joblessness and mounting debt. In Washington, there have been calls to hike taxes and eliminate subsidies for certain industries, countered by warnings that any tax increases will hurt the economy.

Later this week, a 12-member congressional "super-committee" must submit its plan to save at least $1.2 trillion in the federal budget over the next decade. The prospects for a deal continue to dim as both sides refuse to budge on whether to raise taxes.

In Arizona, lawmakers have acted. During the downturn, they approved more tax cuts for corporations and grudgingly sent to voters a proposal to temporarily raise the sales tax, paid mostly by consumers. Voters overwhelmingly approved it. Most of the business tax cuts take effect after the tax hike expires, raising concerns that the state could face a new round of budget cuts at that time.

The state also has cut individual income taxes over two decades, which benefits not only consumers but thousands of business owners who pay their corporate taxes through their individual tax returns.

Tax cuts, however, can create a dilemma for the state when economic and population growth stagnate.

"Any (state) tax cut has to be paid for at the state level," said Matthew Gardner, executive director of the Institute on Taxation and Economic Policy, a Washington, D.C., think tank that advocates for tax fairness. "States don't have the luxury of running up deficits over time as the feds have done consistently. You have to think of the economic impact of the spending cuts, if that's what you're going to do, or the other tax hikes that are going to be required."

Why tax businesses?

The federal government and most states tax businesses because, like individuals, companies use public services.

They depend on schools for an educated workforce. They receive law enforcement protection. Roads and bridges, airports and water systems enable commerce. Businesses depend on courts to enforce contracts and resolve disputes.

But the share of taxes that businesses pay is lower than it was decades ago. The nation competes in a tougher global economy and states compete with each other. The most profitable corporations pay a 35 percent federal tax rate, lower than in the mid-1980s but still one of the highest among industrialized nations.

Many companies avoid paying the top rates by using deductions, credits and various loopholes to whittle away tax bills. In some years, major companies pay little or no federal income taxes. Because most state tax forms derive from the federal one, that often means they pay little in state tax as well. A recent study by an advocacy group found that 30 corporations paid no federal taxes from 2008 to 2010. Among them were General Electric, Honeywell International, Boeing, Verizon Communications and Wells Fargo. The companies denied paying no taxes and said the study ignored deferred taxes.

At the state level, some watchdog groups warn of a "race to the bottom." States keep cutting corporate tax rates in an effort to leapfrog each other and attract or keep new or growing businesses. States have heaped tax credits and other breaks into the mix as well.

Arizona has been doing this for two decades.

Its corporate income tax rate used to be graduated, so the more profits a company made, the higher the rate it paid. The top rate peaked at 10.5 percent in 1974. In 1990, Arizona changed to a flat tax of 9.3 percent, and the rate has been declining since. It stands at just under 7 percent and, under legislation approved this year, will fall to 4.9 percent by 2017.

Arizona is generally regarded as friendly for commerce, according to many measures. Citing everything from low unemployment insurance to the lack of franchise and inventory taxes, Arizona touts itself as a low-cost place to do business.

Last year the Tax Foundation, a nonpartisan research group that generally supports low taxes, ranked Arizona 22nd best for all corporate taxes and sixth for all property taxes. One exception is the business property tax rate, which is considered relatively high but now is set to drop in coming years. Chief Executive magazine ranks the state 13th best for business, citing its favorable taxation and regulation climate.

Will cuts yield jobs?

With falling tax rates, Arizona has aggressively pitched itself as a low-cost place to do business.

Some lawmakers and experts say the new tax breaks strengthen that message.

Kevin McCarthy, president of the Arizona Tax Research Association, a nonprofit group that promotes government efficiency, said cutting corporate taxes enhances the state's appeal at a time when a weak economy pushes states to compete more to attract businesses.

The cost of corporate tax cuts to the state will be less than estimated, McCarthy said, because they will cause new businesses to spring up and others to locate here. He noted those benefits are hard to quantify.

"Those (revenue losses) are going to be offset at some level. How much? Who knows?" McCarthy said.

He also believes Arizona shouldn't levy any corporate income tax at all because the tax "is extraordinarily volatile and becoming more and more problematic." The corporate taxes collected each year can swing widely, making it hard to project budgets. One reason for this is the fact that while there are about 50,000 corporate filers annually, more than half the state's revenue from this group comes from about 100 businesses.

For decades, some economists have asserted that business tax cuts free up money that companies then use to create jobs and invest in operations. The benefits to businesses trickle down to all residents, the theory says. States also seek trickle-down effects by offering tax and other incentives for companies to locate here.

But the evidence for the payoffs is mixed.

In Arizona, proponents can point to the fact that as taxes were being cut over the last two decades, Arizona consistently outpaced the nation in job growth. That was especially true in the 1990s, when the national economy was booming.

Between 1990 and 2000, Arizona's workforce grew by 53 percent, compared with 21 percent nationally. Between 2000 and 2011, the nation's workforce shrank by nearly 2 percent, while Arizona added a net 6 percent.

On the other hand, tax cuts didn't prevent Arizona's economy from being among the hardest hit in the Great Recession.

When the recession began in December 2007, Arizona's unemployment rate stood at 4.1 percent and the nation's at 5 percent. Recent figures show Arizona's jobless rate is 9.1 percent and the nation's is 9.0 percent.

Tax cuts also didn't prevent the state's median household income from falling faster than the country's during the downturn, U.S. Census figures indicate.

Nationally, median income dropped 6.2 percent from the 2007 peak to 2010, the latest period available. In Arizona, it fell 10.7 percent. The state's median income also remains below the national average, as it has since at least 1969. In 2010, Arizona's was $46,789, compared with $50,046 for the nation.

Impact on services

Many business leaders who favor tax cuts say the state's competitiveness hinges on more than low taxes.

Skilled workers, good schools, quality roads and the like are critical.

Business and civic leaders often wring their hands over K-12 education, an area where Arizona's reputation lags.

On the National Assessment of Educational Progress, or the "Nation's Report Card," the state's 4th and 8th graders score below the national average overall in math, reading and science. Four out of five high-school graduates here do not have a college degree six years after leaving high school, a study released last year by the Arizona Board of Regents found.

Such measures suggest the state faces tough choices when weighing tax cuts against the need to improve government-paid services.

Margaret Mullen, chief operating officer for Science Foundation Arizona, said her organization favored the state's reductions in business taxes this year because the cuts will help attract high-tech jobs. But a larger concern is the state's commitment to a high-quality education system, she said. She did not take a position on whether spending on education should be increased.

Mullen said Arizona loses more business activity because of its below-average education system than its tax rates.

"The single largest industry in Arizona is aerospace and defense," Mullen said. "If we lose one of these bases because we don't have the educated workforce, a lot of these companies that we're depending on - Raytheon, Boeing and others - could go with them."

Karen McLaughlin, of the Children's Action Alliance, which advocates for improved health and education for children, said tax cuts have an easier path in the Legislature than tax hikes because they require a majority vote. A tax increase requires a two-thirds majority. The one tax that passed was the voter-approved sales-tax hike, which she said disproportionately hits lower-income families.

"We have a whole host of problems (in the state)," she said. "We keep cutting, cutting, cutting, but we don't do anything to add back in. The only ones who added anything are the voters."

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