An article by Jim Small and Evan Wyloge for the Arizona Center for Investigative Journalism, The cost of cuts: Arizona tax carve-outs last year hit $13.7B, examines “how much tax revenue the state doesn’t collect each year.” Questions about those monies arose during floor debates regarding lead in our schools’ water supplies, and teacher pay this Legislative Session.
According to Small and Wyloge’s article, “In fiscal year 2016, state law allowed $13.7 billion in taxes to go uncollected through a litany of exemptions, deductions, allowances, exclusions or credits. And that number is likely to grow by another $1-to-2 billion once individual income tax deductions are tallied.”
The reporters note that “data compiled by the Arizona Department of Revenue, more than half of all state taxes haven’t been collected for at least the past ten years. Called “tax expenditures,” they amount to $136.5 billion since fiscal year 2007 – roughly equivalent to sum of state budgets spanning the past 15 years.”
It was during one floor debate, that Rep. Pamela Powers-Hannley put those “tax expenditures” into perspective. While she acknowledged that the “state of Arizona needs additional funds to function properly,” it does not need to raise taxes in order to take care of our schools and pay our teachers what they deserve.
“We’re not broke,” said Powers-Hannley. “Our budget is tight because we give away too much tax money. Statutory tax cuts have increased dramatically from 5 in the early 1980s to 331 today. We give away more than $13 billion a year in tax cuts, tax credits, and tax subtractions. The biggest chunk is $12 billion a year in discounted, excused, or rebated TPT. In addition, the budget includes $106 million in debt service.”
2013 – 2016 tax expenditures by type – To View 2007 – 2016 visit the Arizona Center for Investigative Reporting here
| TAX TYPE | VALUE OF FY16 EXPENDITURES | VALUE OF FY15 EXPENDITURES | VALUE OF FY14 EXPENDITURES | VALUE OF FY13 EXPENDITURES |
|---|---|---|---|---|
| AIRCRAFT LICENSE TAX EXPENDITURES | $5,032,946 | $4,985,055 | $5,237,479 | $5,509,385 |
| AVIATION FUEL TAX EXPENDITURES | $162,479 | $149,151 | $200,361 | $63,474 |
| BINGO TAX EXPENDITURES | $73,028 | $70,960 | $72,180 | RANGE: $9,894 – 122,848 |
| BOXING & MIXED MARTIAL ARTS TAX EXPENDITURES | $3,510 | $3,330 | $2,393 | $780 |
| CORPORATE INCOME TAX EXPENDITURES | $133,477,546 | $132,899,546 | $460,328,800 | $114,379,124 |
| FIDUCIARY INCOME TAX EXPENDITURES | $53,703,660 | $32,067,130 | $25,482,180 | $16,238,279 |
| FLIGHT PROPERTY TAX EXPENDITURES | $2,536,654 | $939,316 | $1,160,836 | $900,812 |
| INDIVIDUAL INCOME TAX EXPENDITURES | $375,651,568 | $310,643,144 | $2,233,441,000 | $255,280,000 |
| INSURANCE PREMIUM TAX EXPENDITURES | $241,218,934 | $242,399,848 | $192,143,864 | $205,251,402 |
| JET FUEL EXCISE AND USE TAX EXPENDITURES | $6,164,499 | $6,635,958 | $5,131,667 | $6,213,031 |
| LUXURY TAX EXPENDITURES | $14,597,098 | $38,433,557 | $23,095,734 | $440,305,626 |
| MOTOR CARRIER FEE EXPENDITURES | $157,993,764 | $153,633,293 | $146,508,936 | $143,829,818 |
| MOTOR VEHICLE FUEL TAX EXPENDITURES | $12,446,181 | $10,974,015 | $9,159,048 | $9,250,359 |
| PARI-MUTUEL TAX EXPENDITURES | $3,775,986 | $4,016,340 | $4,032,441 | $4,126,235 |
| PRIVATE CAR PROPERTY TAX EXPENDITURES | $384,354 | $312,407 | $425,322 | $408,268 |
| PROPERTY TAX EXPENDITURES | $403,693,834 | $377,979,585 | $359,909,184 | $328,874,395 |
| SEVERANCE TAX EXPENDITURES | $15,196,006 | $24,862,000 | $26,190,000 | $29,829,000 |
| TRANSACTION PRIVILEGE AND USE TAX EXPENDITURES | $12,262,397,152 | $12,212,283,076 | $12,611,204,000 | $12,107,810,000 |
| USE FUEL TAX EXPENDITURES | $45,731,318 | $43,621,085 | $45,526,448 | $44,186,840 |
| WORKERSÛª COMPENSATION PREMIUM LIEU TAX EXPENDITURES | $1,251,000 | $1,809,939 | $4,995,967 | $2,180,526 |
| TOTAL | $13,735,491,517 | $13,598,718,735 | $16,154,247,840 | $13,714,637,354 |
| House Ways and Means | Vote |
| BOLDING | Y |
| CARDENAS | Y |
| EPSTEIN | Y |
| KERN | N |
| LAWRENCE | Y |
| PAYNE | N |
| WENINGER | N |
| LEACH | N |
| UGENTI-RITA | Y |
Powers-Hannley was not the only lawmaker who questioned the carve outs, according to Small and Wyloge. SB1144 was introduced by Sen. Steve Farley this year. SB1144 would have changed the name of the Joint Legislative Income Tax Credit Review Committee to the Joint Legislative Tax Expenditure Review Committee. That Committee would be tasked to “review each TPT and use tax expenditure to determine whether it should be amended, retained or repealed.”
Referring to the budget filled with questionable line items including $250,000 for horse breeders, Powers-Hannley questioned what the Republican lawmakers were doing. “Today, the majority party voted to give away millions more with no discussion regarding where that money will come from,” said Powers-Hannley. “In addition, the majority party also voted to allow the university system to take on more debt to build buildings—with no discussion regarding the consequences of additional debt or other future university needs.”
“Yes, our budget is technically balanced—taking in $9.7 billion and spending $9.8,” explained Powers-Hannley. “But in reality, Arizona is “upside down on its mortgage.” We are giving away more money than we are spending to run the state. I think it’s time to back away from the buffet. If we want quality education and a solid infrastructure, it’s time to take a good hard look at the tax cuts, tax credits, and tax subtractions.”
The bill passed on a bipartisan vote of 28 – 2 in the Senate and narrowly passed out of the House Ways and Means Committee. As expected, the bill appears to have been killed in the House under the leadership of Speaker J.D. Mesnard.