Monthly Archives: June 2018

Whether you’re a Republican, Democrat or Independent, it is safe to say most people would be aghast at the idea of their tax dollars being used to fund political parties.

Yet that is exactly what the Clean Elections Commission has been permitting for years.

In 1998 Arizona created a new program called Clean Elections, which allows politicians to receive taxpayer money in order to run for office.  Candidates who decide to participate in the Clean Elections system must collect a certain number of $5 individual contributions to qualify for taxpayer funding.

Therefore, it was shocking to see several taxpayer-funded candidates writing large checks from their campaign accounts to political parties.  Many of these candidates were running in uncompetitive districts, and some ran “ghost” campaigns where there was little evidence that they were even trying to win.  When it was all said and done, over $100,000 in taxpayer money was paid to political parties in 2016.

It is pretty obvious that the taxpayer money being funneled to political parties was payback for helping candidates qualify for clean election dollars. It is wrong and must be stopped.

There was an effort in 2017 to end the practice, but after defeating legislation at the capitol, the Clean Elections Commission promised to address the issue through rulemaking.

Instead, Clean Elections passed a rule CODIFYING the practice, sending a direct signal to candidates that it’s OK to send their funding to political machines.  Even more astonishing was that their expanded commission rule now allows for taxpayer money to go to special interest non-profit organizations as well, such as the NRA, Sierra Club and labor unions.

Luckily, voters will get the opportunity to put a stop to this nonsense.  A measure is now on the ballot this November that will ask voters if they want to continue to fork over their hard-earned money to political parties and special interest non-profits.

We are hopeful the answer will be a resounding YES to Stop Taxpayer Money going to Political Parties.

One of the most underreported problems with local government in Arizona is how cities use their almost unfettered permitting, licensing and land use approval powers to exact goodies from businesses and private citizens.

Most of the time the person asking for city approval plays along, and it’s difficult to blame them. If your business or project is dependent on council or staff approval (or future approvals), you have little choice but to meet their demands.

That is what makes it very surprising/refreshing when businesses decide to fight back. That is what happened with SB 1140, which significantly rolled back the video service provider (VSP) franchise licensing scheme deployed by cities throughout the state.

The original purpose of VSP franchise licenses was to make sure companies such as Cox Communications and CenturyLink were meeting certain standards when expanding or improving their video service.  For example, VSPs must access public rights of ways in order to cut into streets to lay cables and serve customers, and the VSP license is designed to make sure it is done properly.

Unfortunately, many cities discovered how much fun it was to demand “sweeteners” in exchange for these licenses.  Some of the demands included free cable boxes for city employees, requirements that certain channels or cable packages be provided, that roadway improvements and beautification be performed that had no connection to the installation of cable lines, and even that these companies provide sponsorships for local community events.

One particularly egregious example well documented in the public testimony of the bill, was in Yuma City.  The major cable provider in Yuma City, Charter Common, took over the license franchise of Time Warner after they acquired the company.  The City of Yuma required in this agreement that Charter Common provide the city with both internet and intranet services for free, as a condition of their license.  This was particularly baffling considering internet has nothing to do with video and cable service.  Despite the questionable legality of this arrangement, businesses find themselves between a rock and a hard place as to how hard they will push back.

Luckily, SB 1140 ended the VSP extortion racket by making the process of granting a franchise license to a VSP non-negotiable.  Instead, cities will be allowed to require all the same assurances such as posting bonds and insurance to ensure proper repair of streets, but they will not be able to use their coercive regulatory power to hold licenses hostage for free stuff.

It is almost absurd that legislation was needed to end a practice that would be illegal if attempted in the private sector. Yet that is the double standard that exists in Arizona and must be confronted at every turn.

Ron Elwood,  chairman of the small business committee opposed to the radical ‘Invest in Ed’ income tax increase, recently penned an oped explaining his opposition to the measure.  Ron Elwood, a Certified Public Accountant and small business owner warns voters about the inevitable damage such a ballot initiative would inflict upon small businesses in Arizona.  Read his op-ed below:

“Invest in Ed” Initiative Will Devastate Small Business
By Ronald S. Elwood, CPA

I’m a small business owner: I offer accounting, CFO, and CPA services to my clients, many of whom are other small businesses.  I provide strategic and financial expertise to avoid risk, leverage opportunity, and maximize returns.  In other words, I know good investments from bad ones.

The proponents of the “Invest in Education” initiative may have a laudable goal – improving our education system through providing additional revenues – however, I believe they have made several dire miscalculations.  Arizonans should beware: this is a bad investment.  The costs will far outweigh any potential gains.

Currently, Arizona has five income tax brackets ranging from 2.59 percent and topping off at 4.54 percent.  With less than two percent separating the bottom from the top brackets, our state does not disincentivize individuals from working hard to make more money.  This is especially true for the thousands of small businesses in our state.

The majority of small businesses in Arizona are S Corps and LLCs.  One main difference between their organizational structure compared to large businesses (mostly formed as “C-Corps”) is how they are taxed.  Small businesses’ income is “passed through” to the individual side.  Meaning they pay personal income taxes on their small business profits.

This proposal isn’t well thought-out.  The people most damaged by this initiative will be small business owners.  Doubling the top two rates is incredibly unfair to the little business that pays personal income taxes on business profits.  It will severely limit their ability to reinvest in their operations, hire people, and expand.  It also puts them at a competitive disadvantage to larger corporations that are taxed at a flat 4.9 percent.

Ultimately, if passed, this proposition will drive start-ups, small businesses, and entrepreneurs to other states with a more competitive, less burdensome tax system that doesn’t punish their success.  States such as Nevada and Texas will more than take advantage of Arizona’s short-sightedness.

Voters should also be aware that Arizona has what is called the Voter Protection Act.  This locks in any initiative passed at the ballot box and precludes the elected Legislature from making any changes to the law unless they have a ¾ majority vote and they further the intent of the proposition.  Effectively, this will make this new income tax system permanent and make it impossible to tweak in the future.  Arguably, the legislature will only have the ability to increase income taxes in the future.  The primary reason we have a representative government and we elect a legislature at all is to determine a budget and relevant tax policy.  I know the complexity of taxes, and I know the best way to debate and craft a modern, simple and effective tax system is not at the ballot box.

It would seem the intention of the backers of this initiative is to “soak the rich” by dramatically increasing the percentage of their wealth that they pay over in taxes.  But Arizonans shouldn’t be fooled.  As has occurred in California, other high-tax states, and at the federal level, those who choose to stay in Arizona and who have the most resources and influence will find ways to shelter their hard-earned income.  The main way this will be achieved is through working the political process to instate protections and limitations to their tax liabilities.

My clients, the small business owner, will have no such advantage.  We are not politically-connected, and we don’t have the power to hire lobbyists to work the Legislature.  Because the legislature will be unable to make requisite fixes to the brackets and rates, tax credit programs and carve-outs will be the go-to mechanism; this will only further complicate our tax code as well as create greater inequities.



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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.