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Entice business through low tax climate, not industry-specific incentives

November 8, 2014

State-by-state comparisons can be useful to determine how Arizona stacks up against our neighbors, including our relative business-friendliness. While we might not agree on the best way to entice companies to locate here, we can all agree that economic indicators and tax structures matter to investors, entrepreneurs and wealth creators.

The Greater Phoenix Economic Council (GPEC) presented the following slide at their “Convening the Community 2” event last week. GPEC has long complained that Arizona lacks the broad array of incentives (i.e. subsidies) that other states offer to entice certain businesses. GPEC used the chart below to illustrate just how many tools we lack compared to neighboring states.

voeller chart1

Source: Slide presentation, Greater Phoenix Economic Council

The Free Enterprise Club decided to make our own chart, but rather than compare incentives, we compared economic prosperity indicators among the same states. Our conclusion? Be careful what you wish for. Aside from Nevada, Arizona smokes the competition in improving the quality of life and prosperity of its residents.

voeller chart-2
Source: Rich States, Poor States (American Legislative Exchange Council); Bureau of Labor Statistics

As you can see, it’s tough for states to overcome a punitive tax system even with a toolbox full of incentives. Arizona needs to stay away from these policies.

As the chart above indicates, Nevada has had a good run of late. With no personal or corporate income tax, it is a desirable place to do business.

The political dynamic in Nevada is 180 degrees from Arizona. Despite having a larger deficit, 31.7 percent vs. 29.8 percent of the  general fund, Nevada’s Gov. Jim Gibbons has threatened to veto any new taxes proposed by the legislature. In Arizona, Gov. Brewer has threatened to veto any state budget which does not include $1 billion in new revenue. As California businesses continue to flee their high-tax state, where will they go? Who will win the battle for economic prosperity?
Steve Voeller is president of the Arizona Free Enterprise Club, a non-profit organization whose mission is to advance policies that promote a strong and vibrant Arizona economy.
Learn more:
Goldwater Institute: How to Restructure Arizona’s Tax Code: A Smarter, Flatter Tax Plan to Create Jobs
Business Journal: Arizona Gov. Brewer says budget fix must include more revenue, not just cuts




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