Image of Vote Yes Prop 306 Branding

Arizonans have won BIG since Congress passed the Tax Cuts and Jobs Act (TCJA) in December 2017.

At the end of April of this year, over $215 Million dollars has been returned to taxpayer and rate payer pockets.  Raises, utility rate cuts, bonuses and expanded benefits have enriched families and small businesses, as well as supercharged the national economy.

The federal legislation didn’t just cut tax rates, but also made reforms to the tax code that greatly simplified and streamlined our tax system, saving average taxpayers time, money and heartburn.  For example, the bill doubled the standard deduction, which will save most Americans the hassle of having to itemize their deductions.

Despite the tremendous benefits to residents in our state, the TCJA poses both a challenge and an opportunity for Arizona.

The Challenge

Arizona’s tax code is reliant on the federal tax system as our income tax forms begin with the Federally Adjusted Gross Income (FAGI) figure.  Each year when the federal government makes tweaks to the federal tax code, the Arizona legislature runs a “tax conformity” bill to align our codes.

The TCJA was passed in December of 2017 and most of the changes went into effect in January 2018 – some even applied retroactively.  These were not small technical changes; but constituted the largest tax overhaul of the last 30 years.  Therefore, the usual tax conformity bill at the Arizona legislature was insufficient to retain coupling with the federal tax code.

Moreover, because the tax cuts put more money directly back into taxpayers’ hands, the average Arizonan’s FAGI also increased.  What does that mean?  If the Arizona legislature does nothing, the State of Arizona will see a significant revenue windfall, borne by Arizonans by way of an unintended tax increase.

In fact, the Joint Legislative Budget Committee and the Department of Revenue, which does the fiscal forecasting for the state’s budget, estimates a $173M increase and a $236M tax increase respectively, in FY 2019 alone.  The number is expected to grow to over $300 million by FY 2020.

The State cannot afford to do nothing.

Aside from the unintended tax increase, if the Legislature and Governor fail to pass tax conformity and reform before the 2019 tax year begins, there will be complete tax chaos in the state.

According to DOR, the impacts of not conforming would include:

  • For 2017, taxpayers would have to amend their returns to back out from federal retroactive changes, including depreciation deductions and taxpayers affected by natural disasters in 2016 and 2017
  • Taxpayers filing for 2018 would not be able to rely on the amount determined in their federal return for the starting point in their state return. This would add the following complexities:
    • DOR would need to create a new form that lists all the adjustments necessary to determine a taxpayer’s 2018 FAGI
    • Taxpayers would need to complete schedules that include hundreds of adjustments simply to determine Arizona’s starting point
    • Major Changes would need to be made to DOR’s tax system
    • The complexities would grow each year with non-conformity
    • Because the additions and subtractions would be non-specific, explaining the process to taxpayers will be extremely difficult

Without a doubt, no one except the CPAs will profit from such a scenario as this.

The Opportunity

Historic federal tax reform has opened a window for Arizona to rethink our tax structure and make changes, that like the federal changes, modernizes and surges our economy.

The state has an opportunity to not just avoid a tax increase, but to use it to address inequities in the tax code, ensure 90 percent of taxpayers do not have to itemize their deductions, and even consolidate tax brackets.

With a major election behind us, it is time for our lawmakers to get down to the actual work of the jobs for which they have been hired.  That means calling a special legislative session prior to January and passing a conform and reform bill.  If they wait and allow the chaos to ensue, they can be sure that voters won’t forget and won’t rehire them in the future.

 

The 2018 elections were filled with contentious candidate races and divisive politics.  But one issue voters decisively agreed upon was Proposition 306, which ended the practice of publicly-financed candidates using their taxpayer money to enrich their political party.

Proposition 306 was passed by the legislature and referred to the ballot box to stop the abuses discovered in the 2016 elections, where over $100,000 of taxpayer money was funneled to the Democratic Party.  That abuse continued this election cycle and would have continued to proliferate if voters hadn’t approved Prop 306.

“We are very pleased that voters overwhelmingly supported Proposition 306 and ended the abuse of the Clean Election System.  And considering that the Citizens Clean Elections Act originally passed with only 50.1 percent of the vote, this was a clear message that voters wanted more accountability and oversight over the program,” said Scot Mussi, President of the Arizona Free Enterprise Club and Chairman of the Stop Taxpayer Money for Political Parties campaign.

Along with the end to the corruptive practice of enriching parties off the taxpayer dime; Proposition 306 will also give much needed oversight of the Citizens Clean Elections Commission by requiring them to follow the same rule-making procedures as every other agency in the State.

Although the elections results were a mixed bag of results for both sides of the aisle – the passage of Proposition 306 was a win for all Arizonans of every political stripe!

The Citizens Clean Elections Commission claims they care about keeping special interests out of the political process by providing candidates with taxpayer funds to run for office.

But as was discovered in 2016 election cycle, politicians and political operatives know how to cheat the system and the unaccountable Clean Elections Commission just doesn’t seem to care.

An examination of campaign finance reports filed by publicly funded Clean Election Candidates in 2018 show over $100,000 being funneled to the state, county and local political parties, as well as to other political operations such as the Arizona Democratic Legislative Campaign Committee (ADLCC).

As was the case in prior elections, the democratic candidates running in the least competitive legislative districts are the biggest contributors to these electioneering efforts.

One of the worst offenders is candidate Lynsey Robinson from conservative legislative district 12 in the East Valley. She gave a staggering $22,590 to the Democratic Party Operations, which is over 50 percent of the total amount she receives from Clean Elections! If her intention was to win her race, sending over half her money to the Party seems like a poor strategy to do so.

Other giveaways to political groups include:
 $21,442 from Jo Craycraft, candidate for Senate in LD 1
 $18,980 from Hazel Chandler, candidate for House in LD 20
 $18,500 from Chris Gilfillan, candidate for House in LD 20
 $14,170 from Mark Manoil, candidate for State Treasurer
 $12,400 from Kiana Sears, candidate for the Corporation Commission
 $9,520 from Kathy Hoffman, candidate for Superintendent of Public Instruction

Interestingly enough, the largest benefactor of these public funds was the ADLCC, a Political Action Committee chaired by legislative democrats to elect democrats around the state of Arizona. Traditionally, victory PACs such as this provide money and support to candidates—they don’t receive money from them. This is because committees such as this fundraise for the express purpose of playing in election races. However, they do so independently of any candidate because it is against the law for organizations and PACs to coordinate with candidates on their election activities.

That makes the expenditure to the ADLCC even more suspicious. Either a candidate is giving them money to use in other more competitive races (which is wrong and must be stopped), or they are giving them money to provide services to their campaign (which is likely illegal.) Either way, the ADLCC’s taxpayer gravy train is an offensive abuse of the system and should be stopped immediately.

The unaccountable Clean Elections Commission has made it clear that they don’t care how our money is wasted, which is why voters must vote YES on Proposition 306. Prop 306 would prohibit candidates from funneling taxpayer funds to political parties and political special interest groups. If there was any question that the exploitation of the system would continue and proliferate – this year’s election season proves otherwise.

Voters should put an end to it by Voting Yes on Prop 306.



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