Over $175 Million has already been put back into the pockets of AZ taxpayers, with more to come…

Now that the dust has settled and Congress has completed the most comprehensive overhaul of the US tax code since 1986, many Arizona taxpayers and business owners are nervously awaiting to see how the Tax Cuts and Jobs Act (TCJA) will affect them.

This is understandable—the tax code is extremely complicated and fraught with uncertainty, making it easy to believe even the most provable lies about the tax plan. The media could have done a better job separating fact from fiction, but they seemed more interested in being cheerleaders for the opposition than challenging the absurd claims being made from the likes of Nancy Pelosi and Chuck Schumer.

The good news is that benefits of the TCJA will be determined not by hyperbole but by results, and Arizona taxpayers are already winning big.

Tax Cuts for Hardworking Families

One of the biggest lies told about the GOP tax reform package was that it would result in tax increases for middle income families. This fable was repeated endlessly, despite the fact that even left leaning think tanks acknowledged that over 80 percent of US taxpayers would receive a tax cut.

In Arizona, the number will be even higher. With a combination of rate cuts, an increase in the standard deduction, the rollback of the State and Local Deduction (that primarily benefited wealthy individuals in high tax states) and the expansion of the child tax credit, the number of people receiving a cut will likely exceed 90 percent.

And the reductions will be substantial. According to the Tax Foundation, the average tax cut for a middle-income family in Arizona will be $2,500. In fact, when calculating different scenarios under TCJA it is difficult to find examples of households making less than $100,000 paying more. A family of 4 with a household income of $70,000 will see their tax bill slashed by approximately $1,900. A single person with one child making $50,000 will see a reduction of $500. A married couple with no kids making $90,000 would get a cut around $1,000.

Bonuses, Pay Raises, Additional Benefits and Utility Rate Cuts

One of the most pleasant surprises following the passage of TCJA has been the flood of announcements by Arizona employers providing bonuses, pay raises and other benefits as a result of tax reform. As of January 11th, an estimated 80,000 Arizona employees have received bonuses, new benefits and utility rate reductions as a result of the GOP tax cuts, totaling $175 Million Dollars. Here are some of the companies that have rewarded their Arizona employees and customers due to the GOP tax plan:

  • American and Southwest Airlines announced $1,000 bonuses for their nearly 15,000 employees in celebration of the GOP tax plan.
  • CEO Bob Parsons handed out $1.3 million in bonuses to his 725 employees at YAM Worldwide.
  • AT&T and Comcast provided $1,000 bonuses to hundreds of Arizonans in their workforce.
  • Bank of America will be giving $1,000 bonuses to their 10,000 Arizona employees that earn up to $150,000 in total compensation.
  • Boeing has committed to $300 million to charitable investments, workforce training and infrastructure improvements.
  • Nationwide announced $1,000 bonuses and an increase of their 401(k)-matching contribution for their 1,800 Arizona employees.
  • Wells Fargo, with over 15,000 Arizona employees, announced the establishment of a $15 minimum wage, $400 million in charitable donations and $100 million in additional capital investment.
  • Wal-Mart has committed to providing their 35,000 Arizona employees a guaranteed minimum wage of $11/hour and bonuses up to $1,000.
  • APS announced that they intend to slash $119 Million from their utility rates, which would save the average homeowner $56 each year.

These are not indirect benefits, this is cash going directly into the pockets of hardworking taxpayers and workers who need it most. Combined with the anticipated individual income tax rate reductions being calculated into paychecks beginning next month, the direct financial benefit for Arizona workers due to tax reform will be close to a billion dollars in 2018.

Expect the winning from tax reform to continue. Thanks to the corporate rate cuts, full expensing and repatriation, Arizona will experience billions more in new investment and job creation in the coming years.

So as the good news from TCJA continues to roll in, it will be interesting to watch opponents to tax  reform try to explain to business owners and hardworking taxpayers why more jobs and money in their wallet is bad for them. Their efforts up to this point haven’t been too convincing.

Last month, the Free Enterprise Club chronicled the sad story of the Irwin Family, whose backyard swim school was shut down by an unfair and punitive regulatory process in Pinal County.

Following the publishing of the Club’s article, Pinal County has decided to circle the wagons and push a new version of events in order to defend their actions. Specifically, they are making several allegations that are misleading, factually wrong and designed to avoid responsibility for their conduct.

To ensure the true victims in this story are not wronged further by denying the facts of their case, the following is a response to the new claims being made by Pinal County, all of which are corroborated by email correspondence, public records and the minutes taken at the Irwin’s planning and zoning commission meeting (case SUP-007-14).

  • Pinal County staff is claiming that the enforcement action was due to “numerous complaints from adjacent residents due to traffic, parking, outdoor storage and noise.” This is factually wrong. In their 10 years of operating a swim school not a single complaint was ever filed against the Irwin’s with the County.

The County’s interest in the case began when a code enforcement officer visited the Irwin’s home on May 10th, 2013 with an advertisement from a Queen Creek summer camp paper. The officer made no reference to complaints filed by neighbors, only that they needed a home occupation permit.

Additionally, the code enforcement officer sent an email to the Irwin’s on June 11th reminding them to “kindly take your (home-based business) application into the Florence office as soon as possible, we can process this and close the case.” The fact that the County never mentions any complaints and was so willing to close the case in a manner favorable to the Irwin’s (following the submission of their application) undermines their new version of events.

  • Pinal County is now claiming that, “after their investigation based on neighbor complaints, the Irwin’s were operating a business that would require a Special Use Permit (SUP).” This is factually wrong. According to County staff, this new requirement for the Irwin’s to apply for a SUP was based upon a review of the Irwin’s website, NOT as a result of any nuisance complaints by the neighbors.

This is known to be true because the code enforcement officer sent the following email to the Irwin’s notifying them that the planning manager decided to require that they file for a SUP.


I’m very sorry, but my manager looked at your website, and decided based on the description you have given on the web, your business is a lot more than what a home occupation would allow.  In order for you to continue to run your fitness/swimming business out of your home, you will need to apply for a special use permit.

I tried to make the home occupation work, but upon looking at what you are advertising, we decided that your business would much better be suited to a special use permit.  I am enclosing a concept review application. You will need to schedule this with the planning department and there is a $200 fee.”

After receiving this email, the Irwin’s decided to pay a $200 SUP applicant fee and participate in a “concept review” meeting on August 20th, 2013 in order to keep their swim school open.  After the concept review meeting and paying an additional $500 fee, the Irwin’s received permission from County staff to move forward with the SUP. Not once at the pre-app meeting were any complaints brought up, nor did staff ever mention any issues or concerns related to obtaining the SUP.

  • Pinal County is claiming that an ordinance change in 2010 resulted in the decision to deny the SUP by the County. What is omitted by staff is that this concern was never mentioned until the actual P&Z hearing and exposes how unfairly the Irwin’s were treated. According to all correspondence and the minutes from the hearing, County staff personally guided the Irwin’s through the zoning requirements and told them they were eligible for the SUP.

County Planner Ashley MacDonald presented her case at the hearing and stated, “As you know, and as was discussed with the last case, neighborhood commercial up to 20 acres is allowed within this designation.” She further explained the layout of the Irwin’s property and told the commission “that there is sufficient parking according to the zoning regulations.” As for community support for the SUP, the commissioners received 46 letters from neighbors in support of the Irwin’s and 3 letters in opposition.

So, if County staff was on board with the SUP and community support was overwhelming, why didn’t they receive approval? The demise of the Irwin swim school occurred when the County’s legal counsel, Mark Langlitz, declared at the hearing “This is a, using a special use permit as a vehicle to really create a situation of spot zoning.  I don’t believe the County has the authority to permit a commercial activity on this site.  I think it’s illegal.”

When Sean Irwin challenged Mr. Langlitz on what constitutes a commercial use and thus would result in “spot zoning”, he responded, “commercial use is an activity done for profit for a business, and (inaudible) were going to be teaching swimming or fitness and gaining revenue, that’s a commercial business.” In other words, according the Mr. Langlitz any for profit business that earns revenue at a home is likely illegal.

Recognizing the glaring problems with Mr. Langlitz’ legal opinion, Sean Irwin later inquired, “if I am no longer making a profit and that money is going to drowning preventions, or actually we just don’t charge our people that are coming for the swim lessons – Now would that be no longer commercial, if we’re not making a profit?”

Mr. Langlitz initially responds by conceding if they are not conducting commercial activities, then they don’t need a SUP and states they can withdraw their application (page 155).  However, later clarifies, “I think I did mention that one of the factors in looking at if it’s a commercial activity is whether it’s a profit.  Nonprofits would also conducting commercial businesses; so it’s – the key is not whether or not it’s for a profit, I just wanted to clarify that (page 160).”  We think it’s safe to say, this string of legal reasoning is far from clarifying.

In conclusion, the Irwin’s swim school was shut down by Pinal County as a result of a questionable legal opinion that wasn’t shared with the Irwin’s until the day of the Planning & Zoning Commission hearing. No complaints were ever filed against the swim school with the County, staff recommended approval of the Irwin’s SUP at the pre-application meeting, and supporters of the school at the P&Z hearing outnumbered opponents 15-1.

The Irwin’s didn’t deserve this treatment, and it is unfortunate the County is not using this case as an opportunity to review their internal policies and procedures to avoid harming more businesses, families and neighborhoods in the future. Instead, they are actively working to obscure their conduct and even blame the victims.

Given Pinal County’s unsavory reaction, it is safe to say they have no intention of changing their ways.  Ensuring an environment that allows no-impact home-based businesses to operate and thrive is too important of an issue to rely on the self-discipline of cities and counties.  Instead, the State Legislature should step up to provide all the state’s home-based businesses more predictability, protections, and an opportunity to prosper.

The criminal justice system is a complex area of policy development, where the Left and the Right often find themselves standing on surprisingly common ground.  Considering public safety is generally the most expensive line item in government, (Maricopa County spends 53 percent of its $2.49 billion budget on criminal justice and public safety,) small improvements to the system could have large social and fiscal returns.

There are three general areas of public policy that affect the system: prevention, intervention, and redemption.

The main prerogative of redemption policies is reentry into society after an offender has served their sentence and paid their restitution.  In other words – reducing the risk of recidivism.  A major part of this equation is legal and gainful employment.

After all, it’s often claimed that a job, is the best alternative to a life of crime.

Ex-offenders face many obstacles to legitimate employment: meager skills, reticent employers, and regulatory burdens that present high costs and high barriers to entry, just to name a few.

Teach Them to be Something Other Than a Criminal

When evaluating recidivism rates, it is clear that the first three years after a convict is released are critical.  That is why offering robust job training programs during and after their sentence is crucial to successful reentry.

This should be more than punching license plates.  Teaching a convict new tools and more sophisticated skills give him opportunities to earn a better living than what a life of crime provides.  Exposure to new thought processes and higher education is also more transformative to the individual and has better long-term prospects than simple existence and survival.

Over the last couple of years, Arizona has been making strides at working with the private sector to implement job training programs at our correctional facilities to give convicts nearing release an opportunity to train and acquire a job. Lawmakers need to take a closer look at the efficacy of these programs and explore ways to accelerate their adoption throughout the state.

Remove Regulatory Barriers to Job Opportunities

Though developing vocational programs and opportunities for convicts is important, their effectiveness will be limited without the removal of regulatory barriers preventing entry into the job market after release.

Occupational licensing restrictions is one area that is in need of reform.  A year ago, ASU economist Stephen Slivinski wrote a comprehensive study on the correlations between occupational licensing and recidivism. In his study, Turning Shackles into Bootstraps, he found states with “the heaviest occupational licensing burdens saw an average increase in the three-year, new-crime recidivism rate of over 9 percent.”

One reason is that the licensing fees and costly time requirements simply price many job opportunities out of reach for most ex-felons. Complicating matters further is that occupational licenses are overseen by boards and commissions that have crafted overly broad “good moral character” requirements that effectively prohibit ex-felons from working in dozens of fields. Policymakers should take a closer look at the costs and unnecessary license restrictions that are preventing convicts from getting a job.

Another regulatory obstacle preventing convicts from finding work is their inability to obtain a driver’s license due to court ordered fines and penalties. Though intended to coerce payment of the fines, the practical effect is that convicts are prohibited from driving until all fines are paid, yet they need to drive in order to work. It is a catch-22 that must be fixed.

If it isn’t a Life Sentence, it Shouldn’t be a Life Sentence

For good reason, many employers feel uneasy about hiring a person with a record.  Often when there are two qualified applicants for a position side-by-side, if one has a record and the other does not, the employer will opt for the applicant who based upon the available evidence poses lesser liability for the business.

One idea being proposed to address this issue is a concept called “ban the box,” which would limit an employer’s ability to inquire about past felony convictions on an application and typically delays it until after the in-person interview.  Currently more than a dozen states have adopted this approach, nine of which directly prohibit private employers from asking about prior felonies on job applications. Additionally, Governor Ducey recently enacted a similar program for hiring state employees.

Though well-intentioned and potentially a good idea for state government, “ban the box” would result in unintended consequences if deployed in the private sector.  Not only is it a clunky mechanism to try to engineer a certain outcome, some studies have shown it actually harms minorities without a criminal background.  It is very likely that businesses would simply make other assumptions and implement alternative hiring tactics to sidestep the prohibition in the vacuum of information.

A possible alternative to ‘ban the box’ that is less intrusive and could accomplish the same goal would be to provide a narrow segment of ex-offenders (that meet certain criteria) an opportunity to seal their records.  For example, if non-violent offenders comply with all court ordered sentencing, treatment, and do not recidivate over a substantial period of time (five to seven years), they could be allowed the opportunity to seal their records.

If a main premise of our justice system is the punishment should fit the crime, then once a person has served their sentence, their payment to society is complete.  Select sealing of records strikes a balance between preserving public safety, allowing for employer discretion, while giving a low-risk population of ex-offenders a second chance at a clean slate.

Arizona, like every other state, is faced with complex and costly policy decisions when it comes to criminal justice.  The time has passed culturally when it was acceptable to simply punish people and hope for the best.  As a society we have recognized that we can do more.  That everyone is better served by a compassionate system that holds individuals accountable while addressing root problems holistically.

Focused and strategic efforts to bring persons with a record into the workforce is significant.  After all, honest work is more than a job; it’s self-sufficiency, it’s a source of pride, and it’s a future.

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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.