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November 25, 2003

Host: Michael Grant
Topics:
· President George W. Bush: Arizona visit;
· Tax reform;
· "Desert Cities" at the Arizona Historical Society
In-Studio Guests:
· Senator Dean Martin, Chair, Tax Reform for Citizens Committee;
· Arizona lawmaker Lori Daniels

>>Michael Grant:
Tonight on HORIZON, President Bush meets with seniors in Phoenix to talk about a prescription drug benefit for Medicare patients plus attends a $2,000 a ticket campaign fundraiser. A citizens committee recommends tax reforms aimed at stimulating business. We'll walk you through some of those. And an exhibit at the Arizona historic society shows the impact of growth on the valley over the past 50 years. Good evening, I'm Michael Grant. Before we get to the presidential visit to the valley, a potential rival for the White House came to the state today. Joe Lieberman filed his paperwork at the secretary of state's office. Joining him was former Arizona senator Dennis Deconcini who was there supporting him.

>>Joe Lieberman:
Dennis was my kind of independent-minded democrat. Yes, we're proud democrats but independent minded, too. When we see something that is right, whether or not every other member of the party is going in that direction we're going to do it because ultimately our responsibility is to serve the best interests of the United States of America. And not to do what just what is politically easily.

>>Michael Grant:
Lieberman made campaign stops in Tucson and Yuma. The democratic presidential primary is one week after the first primary in New Hampshire. President Bush had originally planned to attend a $2,000 a ticket fundraiser tonight but the White House added a stop at a senior center to talk about the prescription benefit plan approved by the United States senate today. Larry Lemmons has more on the president's visit.

>> Reporter:
The president arrives in Phoenix on the day the senate passes the Medicare bill. Bush made the passage a domestic priority. The contentious legislative battle resulted in a victory for the president, at a time when such victims are necessary in the run up to a election year. The stop was an opportunity to meet with Arizona seniors effected by the bill.

>>George W. Bush:
Under the new reforms as I told you seniors will have choices. That's an important part of the bill. We want you to have choices. Earlier today I was in Las Vegas, I met with a couple, the man said, "you know, my wife and I, before we chose our Medicare plus choice plan, maybe some of you are on that plan, before we choose that plan we weighed out the pros and the cons. I listed the pros and cons for a variety of policies. We picked medical plus choice. My point is he spent a lot of time trying to figure out what was best for him and his wife. I'm sure some of you do that as well. That's what we want. We want people to be able to have that choice. I fully understand some on Medicare don't want to choose at all. Some people on the current system, you know like where they are. And they are frightened by change. That's realistic. That's reasonable. I can understand that. So could the congress. And so we said that if you want to stay on Medicare, you can, traditional Medicare, but now we have a prescription drug benefit for the first time. That's important. That's important to recognize the change -- that change sometimes isn't a part of somebody's future. But a lot of people want to choose. And choice is important. See, some people want expanded coverage for hospital stays or protection against high out of pocket medical expenses. People ought to be able to pick a plan and when people pick a plan and they start choice, it's amazing what happens, the plans start meeting the needs of the consumer. Not the whims of somebody in Washington, D.C. who gets to make the decision for you. That's an important part of this bill. This bill introduces choice for our seniors.

>> Reporter:
Democratic presidential candidate Joe Lieberman is also in Phoenix today. The senator accuses the president of trying to gut medical.

>>Joe Lieberman:
I wanted so much to support a drug benefit bill, but when I examined this one, when I opened up that bottle and saw some of the harmful medicine that was put in there by the Republicans in the house, particularly -- regretfully I couldn't support it. I caution seniors be careful before you swallow this particular president's prescription drug plan. Because there's some pills in that bottle that will give you more pain than prescription.

>> Reporter:
President Bush intends to raise money fors his re-election campaign in Arizona. Sources say by the time he leaves Phoenix today the president will add over a million dollars to his campaign. As Arizona grows in population they also grow in political power. At a $2,000 a ticket dinner at the Biltmore plans were being made.

>>Michael Grant:
Arizona Senator Kyl voted for the prescription drug benefit saying it was not the bill he would have written but that's the nature of compromise. He wrote a provision that reimburses professionals $160 for federally mandated emergency care of illegal immigrants. Arizona hospitals could receive $160 million over four years. Arizona senator MCCain voted against the bill. He said it was outrageous that the bill prohibited federal officials have negotiating lower prices with drug companies. Governor Janet Napolitano's blue ribbon panel on overhauling the state's revenue structure has received much publicity while a legislative committee has gone unnoticed. This morning tax reform for Arizona citizens committee heard tentative recommendations. They propose to lower the assessment ratio for business and industrial properties from 25% to 20% over a five-year period. Reduce the number of assessment ratios for bonds and overrides from several to only two. 20% for business, 10% for residential. Tax reform committee tentatively recommends lowering or eliminating the locally assessed business personal property tax paid on machinery and equipment. Another recommendation before the committee, cap sale tax rates for cities and towns while allowing rates in excess of those companies -- caps with voter approval. Tax reform committee looking at allowing counties to put a general sales tax into effect with a super majority instead of a unanimous vote. Those are a few of recommendations before the committee. Joining me now to talk about what else is on the table is senator Dean Martin chair of the tax reform for citizens committee. Here is lawmaker Lori Daniels a member of committee. Good to see both of you. We have several recommendations Let's try to focus on four or five of the perhaps most understandable if there is such a thing in tax parliaments. Let's talk about lowering the business property tax assessment rate, senator, from 25% to 20%. That one is mentioned frequently why is that a good idea?

>>Dean Martin:
It's been job creation. It's been investing in Arizona and the ability to create jobs. Arizona and Maricopa County, the valley area has the third highest property tax ratio in the nation. We can't attract highway -- high wage manufacturing jobs primarily because it's too expensive to operate here. The few examples of where we do is they are in a certain free trade zone. We're looking to give incentives for companies to come to Arizona or expand to Arizona.

>>Michael Grant:
One of arguments made in response, Lori is hold it, sometimes you squeeze it and it pops out some place else or sometimes you deplete it and what are you going to refill it with. Doesn't that put pressure on other areas of taxation if you are dropping the assessment tax ratio for business?

>>Lori Daniels:
It can, Michael, but overall for the last two decades we talked about how the property tax system in Arizona is broken. Not only what senator martin was saying that it's a detriment for expanding businesses but a detriment to keep businesses here. You have to look forward and you have to move slowly. The committee is deliberative in our findings. These are just draft recommendations we're starting with to see what will work and what won't. It's important to get public input and we'll continue to do so. The assessment issue has been around for a long time. We have lower assessment ratios. At one point they were at 30% and now they are at 25%. We have changed that without blowing up the whole system or the state following -- falling apart. You can do it, you just have to do it methodically and deliberately.

>>Michael Grant:
Now this one could be done statutorily.

>>Dean Martin:
We're taking a different approach than previous years. What we're looking at is we're going to make basically an agreement with those who want this lowered. If you want to lower your taxes, you need to start building, constructing, creating jobs in Arizona. We're only going to use the new construction growth in order to buy down the assessment ratio. Unlike other ideas that said you are shifting it over to home-owners or this group or that group, we're not going to do this. It's performance bases. If you are not creating wealth in Arizona then no money is in the assessment ratio. It's possible to do this and have it performance based and not based on a cost shift. It's going to take longer but it's a more equitable way.

>>Michael Grant:
Another recommendation reduce/eliminate the business personal property tax. What we are talking about that the personal property tax is applied.

>>Lori Daniels:
If you have an office it's your desks, computers, file cabinets. We did a number of years ago, put on a position on the ballot to make the first $50,000 of that eliminated where you don't pay a tax on that but the constitution requires we tax all of it. It is a detriment to business. It's a detriment to even small business because it's not that unusual if you have three or four employees like I happen to in my business, to that much business equipment. Let's say you own an automotive repair place and you are a shop small, you have a lot of equipment, a lot of dollars that you are paying a tax on there. It's hard for small business to continually -- it's not only the tax on that it's the continued reporting requirements that go along with that that has been a problem.

>>Michael Grant:
Senator, if I recall correctly, this one is pretty unique to Arizona. Not that many states have this kind of tax?

>>Dean Martin:
The way it's assessed, the way it's done the structure is very unique. It's like a double hit because you have the property tax before. Now it's all the things that go into the building. All the equipment. Everything that makes the operation work. So people have only said we're creating all these telephone jobs, all these call centers. Why aren't we creating other jobs? Telephones are pretty cheap. You try to put any other type of plant or equipment, especially high tech equipment, you are paying every day that that equipment sits in your factory whether or not you are using it. It's a disincentive create the type of high wage jobs that we need.

>>Michael Grant:
Will sales taxes have been paid on this?

>>Lori Daniels:
Absolutely.

>>Michael Grant:
This is a continuing tax in valuation of personal property?

>>Lori Daniels:
Absolutely.

>>Michael Grant:
Cap cities and towns at a 3.5% maximum local sales tax without voter approval. They can go over that. What drew the committees attention to that, senator?

>>Dean Martin:
There's a lot of different disparity between different jurisdictions. It's an issue of -- we're get together point where sales tax is getting pretty high. It's getting where it's effecting consumer spending. To put it back in the voters hands and making that decision -- if you want to go to -- there's a certain level that government needs to operate, you have to operate police and firefighters and such. When you get to the other things we want the voters participating and paying for the projects. The idea is that 3.5% that's the highest rate that any jurisdiction is charging in the state. Beyond that the voters should be making those tape types of decisions or at least have a say.

>>Michael Grant:
Isn't a local way let's say 2% more than norm across the state?

>>Dean Martin:
Right around 2 is about the normal. City of Phoenix is 1.8. There's some slightly above 2. 1.8 to 2.2 is where the see the majority of population.

>>Michael Grant:
Lori, why isn't the response to this local control? Let's face it if the city council votes 3.5 rate people can toss the bums out?

>>Lori Daniels:
How much more local can you get if you let the voters do it. There have been abuses. I'm not saying every town has abused it but there are some. When you look at Arizona sales tax right we're one of top five in the country. I don't think people realize that we're up there. There are some jurisdictions where we're over 10%. At some point we're getting a little bit out of hand.

>>Michael Grant:
Require the state to conform its tax code to changes in the federal tax code, give me an example of that is about?

>>Lori Daniels:
That's a lot of different things. Every year congress and the IRS changes their code a little bit and we have always conformed for the last two decades. That says if you can depression a car 20% a year that you use for business and you do that at the federal level, do you that at the state level. If the federal government faces out the estate tax the state would follow the guidelines. If we don't you have to file two different returns, two different sets of books. I call it the full employment act for CPA's if he don't conform. It's a nightmare for small, not just small but large, too, I think the mom and pop operation holding your books together. You have two sets of rules how do you comply?

>>Michael Grant:
Hasn't the state routinely conformed to the federal government?

>>Dean Martin:
We have routinely -- as long as I have been in the legislature that goes back to the 90s when that became commonplace. We have conformed for a long period of time. The federal government raised taxes. The legislature always conformed to bring more money into the state. Now that the federal government is lowering taxes you are seeing did he at the end of the day this boils down to one thing. When you fill out your federal tax return, you know all the time that takes, you are able to take the adjusted gross income and use the same income number for the state. The federal government and the state see your income as the same thing. We stopped conforming this year. You have to keep two sets of books. You may make one dollar amount with the federal government and a different dollar amount with the state. Once you walk down that road it's a nightmare to care for things. To give you an idea of how bad this is, the C.P.A. at the certified public accountants association is the biggest supporter of this. It's so complex and difficult to manage the ones making the money don't want to do it. It's something that if we don't address it, it could really effect you and the cost of paying your taxes.

>>Michael Grant:
Filling out form does call the old joke short form how much did you make last year? Send it in. That's not on the list?

>>Dean Martin:
Not on our recommendation list.

>>Michael Grant:
All right. The constitutionalization of the rainy fund, what is going on there?

>>Lori Daniels:
Basically, we have had a rainy day fund set up in the statute for quite a few years but we haven't adhered to what the statute said as far as how many dollars should go into the fund, what the formula provides for. The legislature then in good years can't spend the money because it needs to go to the rainy day fund for when we have the crisis like we have had with the downturn in the economy.

>>Michael Grant:
How would you constitutionalize the rate which you would fund the rainy day fund at?

>>Dean Martin:
In the current rainy day fund that we have was drained long before it started raining. For two reasons we used money for other purposes, alternative fuel being the biggest taker, second, we never fully funded it Once fully over the last decade. By putting it into the constitution the legislature can't ignore it. We would use a new baseline. Instead of using personal income which say percentage of how much everybody makes in the state we would use population and inflation. It's a better determiner of how much the state is going to make and what we spend it on. We spend it on people and things. Fair programs, bridges, buildings. By using that as the baseline we can more accurately save the money for the good times for the bad funds.

>>Michael Grant:
One of the arguments about the rainy day fund is hold it. About the only time you have some constraint on the growth of government is when you have some constraint on the revenues. It's a bad time so we look around and see what we created in the past five or ten years and see if it can be eliminated. The creation of a rainy day fund removes that incentive. What is wrong with that argument?

>>Lori Daniels:
It used to be my argument. A lot of things we funded state government at the level we can't touch. They are in formula. Stunt count, how many kids coming to the schools, health care for the poor there. Are areas where we have to fund it. If we don't have the money in the rainy day fund those numbers go up, we don't have revenue growing and we need those funds to get over that hump.

>>Michael Grant:
Almost out of time, but where does this go now?

>>Dean Martin:
The recommendations will be voted on next month and every one will turn into a bill and hopefully we get them to the legislature next year. These recommendations members of committee are looking at sponsoring each and every one of them at some point down the road.

>>Michael Grant:
Senator Dean Martin thanks for joining us. Lori Daniels good seeing you again. It took three years for the Arizona historic societies new exhibit. It's chronicles how the valley has grown in the past 50 years. We get a tour. .

>> Reporter:
For some folks they are the glory years the 50s, 60s, 70s, 80s and the 90s. For the valley of the sun they are the growth years.

>>Mary Melcher:
" Desert Cities" describes growth and change in the valley in the last 50 years.

>>Reporter:
The curator helped put the desert cities together.

>>Mary Melcher:
People moved for lots of different reasons. Many came for jobs. Some came for the climate, others moved for health reasons. A lot of them pulled U-Hauls like this one.

>> Reporter:
Newcomers turned Phoenix to America's 99th largest in 1950 to the 6th largest some 50 years later.

>>Mary Melcher:
When people come through the exhibit they respond to some the photos and cultural icons like bob's big boy, photos of old diners or motels they remember. It brings back a lot of memories for long-time valley residents.

>> Reporter:
The exhibit used personal stories in audio and visual form to examine four areas, housing and communities, economy, arts and entertainment and environmental change.

>>Mary Melcher:
People recall when the land was a lot more open. We have designed the exhibit to give a feeling for openness in the environment section right at the beginning where you have a sense of a lot room, but as you progress through the exhibit it becomes more congested and crowded just like the valley is more crowded through this time period.

>> Reporter:
The facade of one home in the housing and community section may look familiar.

>>Jean Reynolds:
This is a photograph of merry Valentine. This looks at homebuilders within the valley building houses for all the people coming in needing new homes. John F long was the most prominent of those homebuilders. He is still around. He started the community of merry Valentine in west Phoenix.

>> Reporter:
Museum curators point out many blacks and Latinos couldn't live in certain communities. Some lived in run down shacks with no running water. The exhibit looks at the role public housing played in improving the conditions.

>>Jean Reynolds:
There's two reasons for the exhibit. One, is to showcase this collection of photographs that we have that documents the impoverished conditions people were living in and showing how their lives were bettered by the public housing. We have a nice collection in our archives and also it's how to tell the story of how public housing got started. How it improved people's lives.

>> Reporter:
" Desert cities" highlights the one invasion that made living and working in the desert bearable. It officers a glimpse of behind the scenes movers and shakers responsible for growth such as the big three.

>>Mary Melcher:
One is an attorney, one is a banker, one is a newspaper man. He promotes the city through the newspaper. Billson through valley national bank is giving out hundreds of loans to farmers, business people, homeowners and Frank SNELL is promoting different ventures in the community. They worked with other people. They weren't the only ones but they were called the big three.

>> Reporter:
Together they helped attract a high tech industry that played a major part in the valley's growth. Duane Eddie, Marty Robins and the Tubes are some of the many musical acts featured in the arts and entertainment part of exhibit. Special listening stations allow viewers to sample artists from five different decades. It takes you back to the Phoenix radio -- rodeo of rodeos and the parade.

>>Jean Reynolds:
In the 50s and 60s the kids would have a western week at school and they would get a day off. They didn't have to go to school they could see the parade and attend the rodeo. That was exciting. One lady I interviewed she remembered very clearly that during western week she got to wear the pants which was very important. Before that they had to wear dresses all the time.

>> Reporter:
Whether visitors rush through or take their time at the exhibit those who put desert cities together hope visitors not only take away a sense of history but also empowerment.

>>Mary Melcher:
There are a lot of people that got together to make changes occur in this valley. Think we all need to be aware we can make a difference in what kind of a valley we want to have in the future. I hope people come to see the exhibit and get a perspective on the history and how it was created and maybe they'll be able to understand how they can make a difference in the future. .

>>Michael Grant:
If you would like more information on the exhibits hours, you can find it on our web site. Just click on the word horizon and follow the links. Incidentally you can also find the tax reform committees recommendations which we discussed tonight on the web site as well. Here is a look at what is on the program tomorrow.

>>Reporter:
The clear act is a proposal in congress that would require law enforcement agencies to check immigration status of anybody they encounter or lose their federal funding. We talk about that plus the state park has a new attraction, the big room is open. Those stories Wednesday on Horizon.

>>Michael Grant:
Thursday we'll be taking the day off for Thanksgiving. We will be back on Friday with a special edition of horizon. The Cronkite award. It was given this year to CBS newsman Andy Rooney of "60 Minutes" fame. That is the rest of the week. We appreciate you for joining us on this Tuesday evening. I'm Michael Grant. Have a great one. Goodnight.

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