Ted Simons: Good evening, and welcome to "Horizon." I'm Ted Simons. State lawmakers are working in special session this week on a bill design to grow jobs and to improve Arizona's economy. Here to talk about the measure is speaker of the house Kirk Adams and house minority leader Chad Campbell. Good to see you both here. Thanks for joining us. Speaker, we'll start with you. The idea of -- let's get to some of these quickly, cutting corporate income tax rate, why is that necessary?
Kirk Adams: The bill represents a 28% reduction in the corporate incomes tax rate. The reason why that is necessary, Arizona's corporate income tax rate right now is uncompetitive regionally. If you want to attract new capital to our state, investors, you have to provide a competitive rate of return on that investment. We begin to do that now with this bill.
Ted Simons: Response?
Chad Campbell: I don't disagree with the fact that our business tax rates in the state are uncompetitive. The problem with this bill is we're not paying for those tax cuts and democrats have been saying this for about 2½ years now. We need to make it competitive, but we need to pay for them. This bill will cost the state about $540 million over seven years, and we simply can't afford that in today's fiscal crisis.
Ted Simons: The governor's office says $400 million, the numbers vary here. This would be annually come 2018. How do you respond to the idea that we can't afford this, and what do you think of those numbers?
Kirk Adams: When you hear we need to pay for these cuts, what that means is other people need to may more in taxes. That's the wrong way to approach this recession. What this bill represent and why it is supported broadly by the business community is it represents as combined approach of broad-based tax policy to make us competitive, targeted programs to allow us to be competitive, and a change in state leadership on commerce. So we're transitioning to department of commerce from a traditional state-run bureaucracy to a public-private partnership with the involvement of the private sector business community. Those three things combined make this a package that will make Arizona competitive.
Ted Simons: Maybe not everything you want, but you put it together in a package like that, viable, valid?
Chad Campbell: Not at all. Let me counter the speaker's first statement. We are not saying you need to raise taxes, what you need to do is end some of the credits that don't work. I have a bill introduced at this session that actually ends all the corporate tax credits while reducing the income rate down to 5.4%, makes it revenue neutral that. Ends the game of government picking winners and losers, and makes it a broad-based tax base. There is absolutely no legislative oversight on this commerce authority in terms of where they're spending money, and it's requesting $25 million to be funded and I find that very troubling when we're cutting health care, can't fund a 1.2 million dollar organ transplant program, among many other things and we're giving another $25 million to this body.
Ted Simons: What about the oversight concern?
Kirk Adams: I think that's completely incorrect and not based upon facts in the bill. For example, it's a 17-member commission, The Arizona commerce authority. Eight of those appointments are legislative. It is still under the purview of the legislature, their funds are still appropriated by legislature, on an annual basis, like every other area of state government. The policies it impacts the commerce authority can be changed and altered and modified by Arizona state legislature at any time. So to say there's no over sight is simply not accurate.
Chad Campbell: As it stand right now, page 49 of the bill says, this body does not have to adhere to state accounting principles, or reporting requirement and they can set their own rules that. It is in the language of the bill, very clear that we do not have legislative authority as the bill stands right now. And we've seen where that leads us, we sought Fiesta Bowl board mishap we've seen over the past couple weeks, we know where power like this goes without any type of oversight, we know where that leads.
Ted Simons: Last point on this, could it be tightened up a little bit?
Kirk Adams: Let me just say this, that that's apples and oranges. The Fiesta Bowl situation is a private entity, nothing to do with state government. Could this bill be improved? I'm sure it could be. I haven't seen a perfect bill yet at the Arizona state legislature. But I'll tell you this much, the bill has accountability measures in it, the oversight is maintained by the legislature, and executive office, and it wouldn't be the first agency that was able to set its own rules. The fact of the matter is this. This bill represents the combination of good tax policy, good economic programs, and a change in state leadership on commerce, and this is why you see business groups across the board supporting this, because they recognize the impact that this will have on job creation in the state of Arizona.
Ted Simons: Regarding the concern and the idea of just abolishing the corporate tax rate -- getting it down to 5.4%. Broadening that base, working from there, we've heard from some folks, some relatively conservative economic minds saying that's not necessarily a bad idea. Something to consider?
Kirk Adams: I certainly think that's worthy of the discussion. In fact, I had that opportunity, the house ways and means committee earlier this week. But the lowering the corporate income tax rate to 5.4% does not take us far enough. Furthermore, you have to ask the other question, what does the bill as proposed by Mr. Campbell actually do? For example, it would eviscerate the wildly successful solar tax credit program in the state of Arizona. And eliminate those credits. It would also displace thousands of students who rely upon the student tuition organization tax credits to obtain a private education, a key component of Arizona's school choice program. So it would Reyes raise taxes on some, and it would have a dramatic impact. Those are the types of discussions that are worthy of having, but I'll tell you this much, 5.4% does not put us in a competitive position whereas this bill takes it down to 4.9%, and does put us there.
Chad Campbell: What doesn't put us there is cutting education again. We just asked the voters of the state last year to raise the sales tax on themselves so we could better fund education that. Is the governor's request last year, with her big issue. And the voters overwhelmingly supported it. Now we're going to give over half of that back to large corporate interests, and what that means is we're going to have to come back and cut education for the same amount, which is about $500 million. That is not a good strategy for Arizona and the long-term implications means we don't have an educated work force, we don't have fiscal stability and no matter what the tax rate is, we're not going to attract businesses to a state that does not have qualified educated work.
Kirk Adams: To be accurate, the tax cuts in this bill did not begin until after the expiration of the sales tax. That is the governor's position, that's the position she's continued to maintain. And that's what's included in this bill.
Chad Campbell: Which makes it worse, because once the sales tax ends we'll lose another billion dollars in revenue. Right now we have a multibillion dollar deficit in the state, and we're proposing right now with this bill to cut it by another $540 million as well as lose that billion dollars in revenue from the sales tax. That means we're losing $1.6 billion.
Kirk Adams: You can't compare them. The $540 million is at full implementation in 2018. Full implementation in 2018. It is not relatable to the current budget deficit. I promise you this, we will have a budget that balances. We will have a budget that makes those tough choices. But we cannot ignore the pain in the private sector while we take care of the state's business. This begins to address the need for job growth.
Chad Campbell: But our balanced budget means we're going to balance a budget by massively cutting education, which is already the lowest funded education system in the country, and cutting health care for hundreds of thousands of people. And I want to point out, I think it's ironic the AHCCCS cuts that the Republicans are trying to make right now, cost about $540 million, the exact same amount of this tax cut bill.
Ted Simons: The idea behind the tax cut bill is changes mean more business, more business means more tax revenue, and that will -- it's a moving --
Chad Campbell: I agree.
Ted Simons: It's moving target. How do you know it's going to be $400 billion?
Chad Campbell: Ted, here's the point. You can do all of these tax cuts. I have a bill that actually repeals entirely the business personal property tax in the state. More than this bill does. You can do all of this without costing the state and our education system and the kids of this state $540 million. And that's what we should be doing. Comprehensive tax reform that makes sure the long-term fiscal stability state is kept in mind.
Kirk Adams: Comprehensive tax reform is a euphemism for tax increase.
Chad Campbell: Not it is not. It is simply not. That is a red herring that they throw out there. My bill does not increase taxes, it ends tax credits, handouts to big businesses and treats everybody fairly.
Ted Simons: Are you ready to lose tax credits for R&D?
Chad Campbell: You have to pick which one you want to do. It's either do these targeted tax credits or do across the board fair lower taxes. But you can't do both when you have a multibillion dollar deficit in the state and the economy is not turning around.
Ted Simons: Last question here, there's been some concern that this is not been vetted enough, that a certain few number of folks got together, made their decision, special session was called without a heck of a lot of warning and now it's going to sail through the special session. Talk to those who say this could be rushed?
Kirk Adams: One simple word -- hogwash. This bill has been vetted for a very long time. The fact -- the jobs bill that went through the house last year is closely resembles the bill that we have today. The various elements in this bill, some have already gone through the legislative committee process already. But these are concepts and things that have been discussed widely at the legislature, and in the business community, and various economic reports that have been done over the years. There's nothing new under the sun here, what this bill is doing is putting them into a single bill so that we can vote on this and get this done and move Arizona's economy to a better spot than we are now. I refuse to accept this notion that we're better off doing nothing. I mean, we need to act to create these jobs, this bill does it.
Ted Simons: Final point.
Chad Campbell: I would agree. There's nothing new at all in this bill. It's the same failed policies we've had in the past that got to us this point in the first place. I want to point out, last year, many Republicans in the senate and the governor said we cannot afford this bill. Guess what? Our fiscal situation has not changed at all. And yet now we're pushing through the same package.
Ted Simons: We're going to have to stop it there. Great discussion. Thank you so much for joining us.
Chad Campbell Thank you.