The Arizona Free Enterprise Club (Club) today strongly endorsed the budget deal reached by Governor Doug Ducey, House Speaker David Gowan and Senate President Andy Biggs as a bold step forward towards putting Arizona’s fiscal house in order.

“A lot of politicians talk about a balanced budget, but few demonstrate the leadership and courage needed to actually achieve it,” said Club President Scot Mussi.  “The plan the Governor and leaders of the House and Senate introduced today not only shows that they take fiscal responsibility seriously, but that they can protect taxpayers and classroom spending while doing it.”

The budget deal, if passed, will eliminate the structural deficit by 2017, our first balanced budget in over a decade.  The budget also prioritizes dollars to the classroom by increasing funding for K-12 and adding $135 million in new funding towards classrooms.  The plan also provides critical tax relief to small businesses and middle class taxpayers by indexing our tax brackets to inflation and eliminating the job training tax.

“Arizona cannot truly prosper and attract new businesses and jobs until it can show that it is committed to fiscal responsibility, dollars to the classroom, and protecting the taxpayer,” said Mussi.  “This budget achieves precisely that, and will make Arizona a national model for government reform and accountability.”

 

 

One of the most popular programs on television today is also one of the most educational regarding the risky nature of venture capital investing. The show is called Shark Tank, and involves a very simple yet ingenious format where five wealthy investors listen to business proposals by aspiring entrepreneurs and then decide whether or not to invest their own money into the venture.

Now what if I told you that Arizona had its own version of the Shark Tank, except that in our version it was bureaucrats that determined which ventures to support and then gave tax credits to “qualified” investors? We do, except ours is called the Angel Investment Tax Credit Program. Under our version, wealthy investors apply to receive tax credits for making investments into “qualified” small business, as determined by the Arizona Commerce Authority (ACA). Since the tax credits go to the investor and not to the entrepreneur, the investor benefits regardless if the business succeeds or not.

Subsidizing investor risk is a really bad deal for taxpayers, but that has not stopped advocates from introducing HB 2011, legislation that will greatly expand the size of the Angel Investment program. The main argument in favor of expansion is that good ideas have a hard time finding investors and thus need the extra incentive. Often proponents will try to point to Angel Investment “success stories” where a qualified business has flourished after receiving an influx of venture capital.

Upon closer examination none of these arguments hold merit. The reality is that if a good idea exists, it will attract venture capital regardless of any tax credits provided by taxpayers. This is nothing more than ‘found’ money for the investor.

Arizona taxpayers subsidizing the investment risk of good ideas is the best case scenario for the program. Then there is the worst case scenario—tax credits flowing to investors who put money into bad ideas that should have never made it out of the starting block.  These could be proposals that initially appeared be a good investment but over time failed due to poor strategy, management or implementation. Or taxpayers could be subsidizing the worst pitches in Shark Tank history—that is up to the ACA to decide.

It is simply not true that wealthy investors need additional taxpayer assistance or that the government is better at determining “qualified” venture capital investments than the private sector. Additionally, as Shark Tank has proven, there are already private sector solutions for attracting venture capital. Arizona should get out of the venture capital business and reject HB 2011.

The taxpayers of the City of Phoenix – proud owners of a failing hotel, $1.5 billion in deficits over the next two years, and $3 billion in unfunded pension debt – are likely to see their sales tax nearly doubled to pay for $30 billion in transportation projects that are already losing money.

You read that right.

Phoenix’s current transportation tax – Transit 2000 – will expire in five years, and the Phoenix City Council is preparing to nearly double it – from .4% to .75% – to raise $30 billion for a hodgepodge of projects that the city neither needs nor can afford in the first place.  What’s more, the Council is being asked to do away with any pretense of making the new taxes temporary or subject to review.  They will simply make them permanent.

Keep in mind that Arizona still has one of the highest sales tax burdens in the nation, even after letting the 2010 sales tax hike expire.

However, the bulk of the new taxes would be spent on the further expansion and maintenance of light rail.  In fact Phoenix mayor Greg Stanton has plans to triple the size of the system.  As we approach the ten-year anniversary of breaking ground for light rail, it’s worth noting that it has never, ever operated in the black.  Instead it’s operating losses amount to tens of millions each year, which the City of Phoenix has to absorb.   For example, Phoenix spent roughly $22 million to operate light rail last year, but only recovered $8 million.

So – drowning in debt, facing over $1 billion in new deficits, and faced with the reality that taxpayers spent $1.4 billion to build a slow moving trolley that loses $14 million a year – the Phoenix City Council is poised to double your sales taxes to triple it.  All while police and fire continue to be dangerously underfunded.

Don’t let them get away with it.  We encourage all Phoenix residents to call their councilmember, write letters to the editor, and show up to the City Council for the debate over this irresponsible tax hike – and let your voice be heard.



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The Arizona Free Enterprise Club is a free market policy and lobbying group dedicated to promoting a strong and vibrant Arizona economy.