Positive reactions continue to come in from business groups in response to the Arizona Legislature’s passage this week of a Fiscal Year 2022 budget package which includes more than $1.3 billion in tax cuts, $1 billion in payments toward state debt, and a transition of the state’s multi-tied income tax system to a flat rate.
The nonprofit, nonpartisan Arizona Tax Research Association called passage of the FY2022 budget “a watershed moment” for Arizona, while Scot Mussi, president of the Arizona Free Enterprise Club, commended the Legislature for passing what he called “historic” tax cuts.
“Every single taxpayer in Arizona will now get a tax cut,” Mussi said. “This is great news for the future of our great state!”
The National Federation of Independent Business, which advocates for small and independent businesses across the country, gave a shout out to the Legislature via Twitter for adopting “landmark property & income tax reforms” which support small businesses. “Your work will allow small businesses to grow our state economy and create more jobs #ForArizonans,” the message said.
On Friday, Gov. Doug Ducey issued a video statement celebrating passage of the 11 bills which make up what he calls the state’s “fiscally conservative, forward-looking budget” that starts July 1.
“Here in Arizona our economy is booming,” said Ducey, thanking House Speaker Rusty Bowers, Senate President Karen Fann, and all the legislators. “New people and businesses are moving here every day. And at the state level that’s resulted in record revenue. With this budget we’re investing those dollars in the things that matter: schools, universities, community colleges, and new roads and bridges, just to name a few.”
Ducey added that “most importantly we’re giving a bulk of the surplus dollars back to the people who earned them.”
A budget signing ceremony must wait until at least Monday when the Senate returns from recess to formally transmit the budget bills to the governor.
Meanwhile, supporters of the voter initiative known as Proposition 208 are promising a court fight over a bill Ducey is also expected to sign next week.
Prop 208 passed last November by a slim margin of 51.75 to 48.25 percent. The purpose of the initiative was to provide additional funding for public and charter school by way of a new 3.5 percent income tax surcharge for many Arizonans.
Among those subject to the new tax surcharge would be thousands of small business owners who currently report business profits on their state personal income tax return. SB1783, however, provides a small business alternate income tax as an option for those who operate as sole proprietors, LLCs, professional partnerships, and S Corporations.
Under the alternate tax, income derived from small business can be reported on a special small business income tax form. This will ensure the income is not added into personal income for purposes of calculating the amount of Prop 208 surcharge a taxpayer owes.
Critics contend SB1783 is a way to unlawfully circumvent the taxation provision of Prop 208. Proponents of the bill point to the many statements made prior to the 2020 General Election which assured business owners that “business income” would not be subject to the surcharge.
Senate President Karen Fann will try one more time this week to pull together the 16 votes needed to pass the budget bills, something she could not do Wednesday when one of the 30 senators did not come to work.
The Republican-majority Senate stands in recess until 11 a.m. Thursday at which time several bills are scheduled to be considered, most of which are budget-related. There was hope Wednesday that the 16 Republicans would pass the bills, but Sen. Michelle Ugenti-Rita’s daylong absence quashed that option.
Fann and Majority Leader Sen. Rick Gray need the entire Senate Republican caucus on board, so if it appears the 16 votes are not a sure thing Thursday then Fann can simply recess her chamber until June 10, a plan put into place Wednesday night after House Speaker Rusty Bowyers chose to recess his chamber for several days.
In the meantime, the fate of the months-long negotiated spending budget, tax cuts, and plan to transition Arizona to a flat rate income tax remains uncertain, according to budget-watchers. And that may not bode well for the flat tax plan which Republicans have sought for years.
“Right now, the flat tax proposal is still being negotiated among members to address a couple of concerns,” according to Scot Mussi, head of the Arizona Free Enterprise Club. “The first concern is the alleged impact on cities and towns due to revenue sharing. Cities are arguing that the tax cut will result in a massive cut in shared revenue from the state.”
But Mussi pointed out that flat tax supporters, including AFEC, believe cities are enjoying budget surpluses -in some cities quite sizable surpluses- and continue to receive a large infusion of new revenue from the taxation of online remote sales.
“The second concern was that the proposed tax package included a tranche of special interest tax breaks, which groups like ours oppose,” Mussi said. “It is our understanding that most of these tax breaks, including one for low income housing and another for wealthy investors, will be removed from the plan.”
But Mussi says groups like AFEC continue to support this year’s budget plan -minus the special interest tax breaks.
“Currently, Arizona has one of the highest income tax rates in the nation and we are uncompetitive compared to our low tax neighbors. The proposed tax plan goes a long way toward addressing this problem,” he explained.
With uncertainty over whether Fann has the 16 votes in the Senate and House Speaker Rusty Bowyers has his 31 votes, Mussi says the budget negotiations are likely not over.
“There is still a lot of horse trading occurring, much of which will continue,” he said. “Some of the demands still being made related to the budget is to rein in some of the pork barrel spending, make tweaks to the tax plan to address concerns with the cities, and to address other policy issues such as election integrity and school choice.”
And what about Fann and Bowyers trying to poach support from a few Democrats if not all Republicans are on board soon? Mussi believes the only budget bills Democrats may vote for would be the Education Budget which includes K-12 spending increases. But the legislative leaders are likely to have a hard time getting any further support across the aisle for the rest of the budget, Mussi said.
On Wednesday, the Arizona Senate passed SB 1377 in a bipartisan vote, a bill that offers protection from litigation for businesses and others who act in “good faith” to implement reasonable policies to protect their customers, clients, and patients.
The bill, sponsored by Sen. Vince Leach, is considered “a critical piece of legislation” by large and small business organizations, who hope to open fully now that important COVID-19 metrics have dropped dramatically in the state.
DATA UPDATE:
Arizona’s number of ICU beds in use by #COVID19 patients decreased to 430. The number of ventilators in use by COVID-19 patients decreased to 253. 1/ pic.twitter.com/ILX4Uid14d
Specifically, SB 1377 establishes “civil liability standards for specified acts or omissions during a state of emergency for a public health pandemic.” The standards would be established retroactively to March 11, 2020. March 11, 2020 is the date Gov. Doug Ducey declared a state of emergency due to COVID-19.
“Small business owners were crushed by the pandemic lockdown, and now face the prospect of enduring years of frivolous litigation by trial lawyers looking to cash in by blaming the spread of Covid on employers,” said Scot Mussi, President of the Arizona Free Enterprise Club. “SB 1377 would provide much needed legal protection to small business owners so that they are not sued for simply trying to stay open during the current crisis.”
The sponsor introduced the bill to ensure a presumption that any person or “provider” acted in good faith to protect a customer, student, tenant, volunteer, patient, guest or neighbor, or the public from injury or loss through reasonable attempts to comply with rely on published guidance issued by a federal or state agency in connection to a public health pandemic.
1. Precludes from liability for damages, during a public health pandemic state of emergency declared by the Governor, a person or provider who acts in good faith to protect a customer, student, tenant, volunteer, patient, guest or neighbor, or the public (litigant), from injury from the public health pandemic for injury, death or loss to person or property that is based on a claim that the person or provider failed to protect the litigant from the effects of the public health pandemic, unless it is proven by clear and convincing evidence that the person or provider failed to act or acted and the failure to act or action was due to that person’s or provider’s willful misconduct or gross negligence.
2. Establishes a presumption that a person or provider acted in good faith if the person or provider adopted and implemented reasonable policies related to the public health pandemic.
3. Applies the standard for liability to all claims that are filed before or after the general effective date for an act or omission by a person or provider that occurred after March 11, 2020, and that relates to a public health pandemic that is the subject of the state of emergency declared by the Governor.
4. Exempts claims for workers compensation from the outlined liability standard.
5. Defines provider as:
a) a person who furnishes consumer or business goods or services or entertainment;
b) an educational institution or district;
c) a school district or charter school;
d) a property owner, property manager or property lessor or lessee;
e) a nonprofit organization;
f) a religious institution;
g) the state or a state agency or instrumentality;
h) a local government or political subdivision, including a department, agency or commission of a local government or political subdivision;
i) a service provider;
j) a health professional; or
k) a health care institution.
Health Professionals and Health Care Institutions
6. Precludes from liability for damages, during a public health pandemic state of emergency declared by the Governor, a health professional (professional) or health care institution (institution) that acts in good faith in any civil action for an injury or death that is alleged to be directly or indirectly the professional’s or institution’s action or omission while providing health care services in support of the state’s response to the state of emergency, unless it is proven by clear and convincing evidence that the professional or institution failed to act or acted and the failure to act or action was due to that professional’s or institution’s willful misconduct or gross negligence.
7. Applies the outlined limited liability to any action or omission that occurs:
a) during a person’s screening, assessment, diagnosis or treatment and that is related to the public health pandemic that is the subject of the state of emergency; or
b) in the course of providing a person with health care services and that is unrelated to the public health pandemic that is the subject of the state of emergency if the professional’s or institution’s action or omission was in good faith support of the state’s response to the state of emergency, including:
i. delaying or canceling a procedure that the professional determined in good faith was a nonurgent or elective dental, medical or surgical procedure;
ii. providing nursing care or procedures;
iii. altering a person’s diagnosis or treatment in response to an order, directive or guideline that is issued by the federal government, the state or a local government; or
iv. an act or omission undertaken by a professional or institution because of a lack of staffing, facilities, equipment, supplies or other resources that are attributable to the state of emergency and that render the professional or institution unable to provide the level or manner of care to a person that otherwise would have been required in the absence of the state of emergency.
8. Establishes a presumption that a professional or institution acted in good faith if the professional or institution relied on and reasonably attempted to comply with applicable published guidance relating to the public health pandemic that was issued by a federal or state agency.
9. Allows a party to introduce any other evidence that proves the professional or institution acted in good faith.
10. Applies the standard for liability to all claims that are filed before or after the general effective date for an act or omission by a person or provider that occurred after March 11, 2020, and that relates to a public health pandemic that is the subject of the state of emergency declared by the Governor.
11. Exempts claims for workers compensation from the outlined liability standard.
Under the legislation, a provider is defined as a person who furnishes consumer or business goods or services or entertainment, as well as an educational institution or district, school district or charter school, property owner, property manager or property lessor or lessee, a nonprofit organization, a religious institution, a state or a state agency or instrumentality, a local government or political subdivision (including a department, agency or commission), a service provider, a health professional, or a health care institution.
Anyone wishing to claim an “injury, death or loss to person or property” based on a failure to protect the litigant from the effects of the public health pandemic must be able to show the person or provider acted with “willful misconduct or gross negligence.” The liability protection also includes inactions which are alleged to have caused harm.
PHOENIX – On Monday, Governor Doug Ducey, in his State of the State address, called for the need to “think big” on lowering and reforming taxes.
“My goal has been to make Arizona the best place in America to live, work, and do business – by letting Arizonans keep more of their hard-earned money,” said Ducey, “and having come this far, as other states chase away opportunity with their new taxes, why on earth would we ever want to follow their failed and depressing example?”
“Arizona is now a high-tax state with one of the highest income tax rates, sales tax rates, and business property tax rates in the country,” said Arizona Free Enterprise Club President Scot Mussi. “Bold and swift action needs to be taken to right Arizona’s competitive disadvantage, and the Club is glad to see the governor leading on the issue.”
The Arizona Free Enterprise Club, a nonprofit organization devoted to reducing the income and property tax burden in Arizona, has joined other interested parties in a lawsuit against the latest tax hike embodied in Proposition 208 (Prop 208).
On November 30, 2020, attorneys at the Goldwater Institute, Snell & Wilmer, and Greenberg Traurig filed suit on behalf of a coalition of taxpayers, legislators, and small business groups such as the Arizona Free Enterprise Club, to challenge the legality of Prop 208 and to protect Arizona taxpayers against what they say is an “illegal and ill-conceived measure.”
“Arizona is now a high-tax state with one of the highest income tax rates, sales tax rates, and business property tax rates in the country,” said Arizona Free Enterprise Club President Scot Mussi.
According to the court background materials, “in the fall of 2020, a group of out-of-state unions and special interest groups placed an initiative on the Arizona ballot designed to raise taxes by nearly $1 billion. Although sold as a measure that would only raise taxes on the rich, in reality the tax falls on middle-class wage-earners, particularly owners of small businesses. In fact, half of the people subjected to the tax would be small business owners.”
Should Prop 208 survive legal challenges, critics claim it would “likely drive businesses out of the state and to slow business growth, resulting in the long term in some 124,000 fewer new jobs over the next decade, and a loss of $2.4 billion in state and local taxes.”
