News and Updates

A group of Phoenix residents and business owners successfully submitted over 40,000 signatures to the city clerk yesterday to refer an initiative to the ballot to end the $1 Billion construction of future light rail projects.  The committee held a press conference to mark the momentous achievement.

After the city of Phoenix railroaded citizens of South Phoenix by  pushing plans of a light rail extension on Central Ave that would reduce the number of traffic lanes from four to two, a grassroots effort emerged to beat back the disastrous plan.

Since community opposition began to coalesce in April of this year, the group has successfully stormed city hall, held community forums that reached thousands of residents, and stalled the 2-lane project on Central.

Their latest efforts were bolstered by support from residents and business owners throughout the city who would also be negatively affected by the expansion of light rail near them.

Building a Better Phoenix (BBP) put the City, the Federal Transit Administration, and Valley Metro on notice to cease any further funding or construction of light rail projects until the citizens have a chance to vote on the initiative, which will likely be in May or August.

This is a true David and Goliath story as the citizens’ group will likely be outspent 10:1 by the light rail and construction lobby.  But facts are on their side.   Instead of spending 40 percent of the city’s transportation revenues on light rail which serves less than 1 percent of the population, BBP would divert the money to be used for infrastructure improvements, including roads and bus service, which alleviates congestion.

A lot will ride on the success of the upcoming campaign, especially for South Phoenix who will experience certain gentrification of their neighborhoods, increased crime and homelessness in their community, and inaccessibility of emergency services with the 2-lane configuration.

The City of Phoenix is in desperate need of infrastructure improvements.  Their roads are riddled with potholes and many are falling into complete disrepair.  Especially in South Phoenix, many bus stops lack proper shading, long stretches of road are without sidewalk, and residents complain of poor lighting.  Light rail has long been a rat hole of the taxpayers’ finances while also being ineffective at increasing mobility or convenience to residents.  If the BBP initiative passes, money will be able to be diverted to higher priority challenges and more directly serve the citizens and businesses of Phoenix.

We hope the taxpayers of Phoenix will take this golden opportunity to hold city hall accountable and pass this historic initiative.

 

Recently the City of Phoenix did something shockingly out of character.  They made a good financial decision.

Two weeks ago the city council voted 7-1 to end their membership with the Arizona League of Cities and Towns.  The League is an organization that depends on taxpayer money to hire lobbyists to persuade Arizona lawmakers to pass or defeat bills often contrary to taxpayer interests.  At $145,000 a year, the City of Phoenix represented the largest single membership of the League.

Several of the council members cited the ineffectiveness of the League as their reason for their exit.  Although it is likely that the City will simply use the money to hire more internal or contract lobbyists, the vote was still monumental as Phoenix has been a member of the League for over 80 years.

The City of Phoenix’ decision will be a significant signal to other Arizona cities and towns and may spur other local councils to weigh their investment in the organization.

The practice of local municipalities enriching lobbyists to fight for more government authorities and against good reforms that benefit taxpayers is common place.  Just three years ago, the Club did independent research into just how much cities were wasting on lobbying activity.   But the costs aren’t just monetary.  Every year, dozens of bills are introduced at the legislature that promise important protections for taxpayers in the way of property rights, economic liberty and free speech.  And each year dozens of city lobbyists work to ensure their defeat.

Though the City of Phoenix’ decision to remove itself from a big organization that solely exists to fight for more government might not have been philosophic – it does represent a win for taxpayers.  Hopefully more cities will take their lead; at least on this decision.

 

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.

 



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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.