- Associated Press - Thursday, March 2, 2017

PHOENIX (AP) - The full Arizona House on Thursday rejected a measure allowing big manufacturing companies like chip-maker Intel to use millions of dollars of existing tax credits they can’t currently cash in, despite efforts by the Republican sponsor to make it more palatable.

The 23-36 vote rejected Rep. Jeff Weninger’s proposal, although it could be revived later under a procedural move and Weninger said he’d keep trying.

The measure had bipartisan support and opposition, with opponents on both sides of the aisle concerned about tax giveaways and supporters saying it will draw new investment and increase state income tax revenues.

The bill allows companies to get cash refunds or sales tax offsets when they build new facilities by cashing in tax credits, although Weninger amended his proposal Thursday to lower its overall cost. House Bill 2492 also contains three other major incentives benefiting manufacturers like Intel, Raytheon, Honeywell and Boeing.

One returns half the income tax withholding from new workers, another creates a new sales tax exemption for some supplies, and a third lowers property taxes on new equipment in special trade zones.

Weninger lowered the withholding tax provision, and promised to remove the sales tax exemption. The cost went down from about $20 million a year to about $15 million. But he still couldn’t get the votes.

“Sometimes these bills are tough, but this subject I think is very important,” he told fellow House members. “I’d just love to see more jobs in the state, which means more and more taxpayers.”

The Chandler Republican says his plan is needed to boost the state’s competitiveness.

But fellow Republicans joined some Democrats is arguing against the bill. Democrats said the money is needed in education, while Republicans argued it picked economic winners from among the state’s biggest employers.

Republican state Rep. Eddie Farnsworth, of Gilbert, noted that the big manufacturers already has amassed nearly $1 billion in tax credits but can’t use them because of favorable tax treatment.

“So this idea that we have to somehow now give them additional tax credits, additional uses when they have not used up the tax credit they’ve already allowed them to take … at some point it doesn’t make sense and I think this is the point,’ he said.

And Democratic state Rep. Pamela Powers Hannley, of Tucson, argued that giving companies like Intel a break does nothing to help small local businesses. And she said average families don’t get the sales tax breaks envisioned for the big manufacturers, noting sales tax hikes in Tucson.

“We shouldn’t be asking the mom who buys diapers to pay more in sales taxes at the same time we’re allowing the most successful businesses in our state to not pay sales taxes,” she said.

Weninger said in an interview that the companies’ expansions resonate though the whole economy and that new, high-paying jobs bring in state revenue.

“My basic view of economics is if Honeywell puts in 2,000 jobs at over $100,000 apiece, do the math,” he said. “That’s $200 million in payroll times 3.5 to 4 percent, that’s $7 million a year in income taxes,” he said.

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