- Associated Press - Tuesday, February 10, 2015

PHOENIX (AP) - An Arizona House bill that cuts income taxes if the state begins collecting sales taxes from online sales was voted down Tuesday, with several Republicans breaking ranks from the majority to oppose the measure.

The bill by Republican Rep. J.D. Mesnard of Chandler failed on a 27-30 vote, but Mesnard asked for a reconsideration vote, now set for Thursday.

There were two Republicans absent Tuesday, and Mesnard said he believes he has the votes for his bill to pass on a second go-around. Whether that actually happens will have to wait for Thursday’s vote. It takes 31 votes to pass legislation in the House.

House Bill 2061 forces the state to cut income taxes by the same amount collected in the first year the state begins collecting online taxes. That could only happen if a federal proposal called the Marketplace Fairness Act becomes law and requires online sellers to collect sales taxes for states.

Mesnard said even though the taxes are now legally owed, starting to collect them is essentially a new tax.

The Republican split was the first time this year where the majority caucus wasn’t unified. That’s been a consistent event in the past two years as more conservative members were blocked by members of their own party on some issues.

Among majority Republicans who voted against the bill was Rep. Doug Coleman from Apache Junction.

“I believe that not only do we have a spending problem, in that we’re spending money in places where we probably could be more frugal, but I do believe we have a revenue problem,” Coleman said.

He said until the state can fund its school building fund and roads, he has a problem preventing future lawmakers from being able to decide revenue questions.

Mesnard said even though the taxes are now legally owed, starting to collect them is essentially a new tax. The same proposal failed in the House last year.

Collecting taxes from Internet sales could bring big money into state coffers. Estimates vary from a low of $100 million to more than $700 million in additional state and local sales tax dollars annually.

Democratic Minority Leader Eric Meyer said the sales taxes could at least be a partial solution to underfunded schools. Courts have ordered the Legislature to increase school funding by more than $330 million this year for skipped inflation increases, although the Legislature disputes that number. Lawyers for schools and the Legislature are mediating that dispute.


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