The Millionaires Club

Posted on May 01, 2007
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A few weeks ago, the Phoenix City Council agreed to give Thomas J. Klutznick Co.­ $100 million for building a high-end shopping center. Backers of the deal say failure to subsidize retail would send developers to other cities or to Arizona's Indian reservations.

With a total sales tax of 8.1 percent, Phoenix has the highest sales tax rate of competitor cities. It may very well be true that Phoenix is losing business to neighboring cities. Poor tax policy has that effect.

If taxes are stifling new business, the city should lower rates across the board. But tax deals for select companies reek of political favoritism and enrich the well-connected. How can mom-and-pop businesses compete when big developers are getting million-dollar subsidies?

Deals like this are the reason Arizona has a constitutional prohibition on corporate spoils. The ban on subsidies is absolute, Neither the state, nor any county, city, town, municipality shall ever make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation.

Judicial decisions have eroded this clauses power, which can and should be remedied by a simple legislative act restating the law, or court decisions that return to the constitutions plain meaning.

The Goldwater Institute has spent years advancing tax relief and tax reform. But no proper reading of the constitution permits cities to advantage select companies. We would like to welcome Klutznick Co. to Phoenix, but only by the same rules and on the same playing field as everyone else.

Key Links
-Arizona Republic: Phoenix's deal with developer a disservice to taxpayers
-Arizona Constitution: Article 9, Section 7
-Goldwater Institute: How the Arizona Constitution Protects Taxpayers: The Importance of Safeguarding Article IX

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