Last month, the leaders of both Arizona state houses announced committee assignments, setting the stage for next year’s legislative session after a bumpy year in and out of session with COVID-19 interruptions.
One committee important to business and industry is the Senate Finance Committee, which is charged with ensuring there is enough money to run the state, expand or shrink programs as needed, and craft legislation related to taxes and revenue.
Senator David Livingston (R-Peoria), long an advocate for job creators, was named the new chair of the committee for next session. Livingston, who currently serves as vice chair, spoke to Chamber Business News about what he foresees as priorities in 2021.
Livingston, whose personal career in finance has centered around managing budgets, pensions and insurance, said he will continue to work to ensure the Public Safety Personnel Retirement System of the State of Arizona and the Arizona State Retirement System state pensions are funded and to attract insurance companies and their high paying jobs to the state.
As Finance Chair, he will continue to support bills that reduce government red tape and overregulation and create a friendly environment for existing businesses and to attract new industry.
“As a conservative Republican, my priorities are always how can we reduce taxes and regulations on the citizens and businesses of the state,” he said.
Priorities for 2021 legislative session
Much of the committee’s work next year will be revisiting bills that got pushed aside due to COVID-19 interruptions, Livingston said. While much will be “clean up” work, there are two major new challenges facing businesses in the state.
Lawmakers will be seeking solutions on how to offset harm to employers from the two statewide propositions passed in the recent election: Proposition 208, which instituted a major state income tax increase, and Proposition 207, which legalized recreational marijuana.
The Finance Committee was scheduled to begin discussions on the two new laws Monday, but the meeting was cancelled due to a COVID-19 scare after legislators may have been exposed to the virus when President Donald Trump’s personal lawyer, Rudy Giuliani, met with them last week. Guiliani has since tested positive for the virus.
Mitigation for small businesses hurt by Proposition 208
Once they are able to reconvene, the committee will discuss and solicit input on what can be done to lessen the impact on small businesses from the income tax increase proposition.
The new law almost doubles the income tax on Arizona’s wealthiest citizens to fund education. But in doing so, it also impacts tens of thousands of businesses. These are companies with 500 or fewer employees who file under the individual tax code as pass-through entities, such as sole-proprietorships, partnerships, LLCs, and S corporations.
Many voters were unaware that small businesses would be affected when they voted for the measure, business advocacy groups said. Now, news reports are already surfacing about companies leaving the state or rethinking plans to consider locating here.
“I’ve had a lot of discussions with business owners and chambers about how devastating Proposition 208 could be on our businesses — our existing businesses and our ability to recruit businesses to move to Arizona,” Livingston said. “So we have to find a way to deal with Proposition 208. If that means softening it, if that means repealing it, if that means going back to voters…”
Analysis by a number of economists like Elliott Pollack of Arizona State University’s Economic Outlook Center and organizations like the Arizona Tax Research Association and Goldwater Institute estimate that the proposition could result in the loss of up to 124,000 jobs and $2.4 billion in tax revenue over the next decade. New business locations to the state are estimated to drop by 15 percent.
Pollack, at a Pinal Partnership 2021 Market Forecast last week, said, “The only negative for the Phoenix economy is this Proposition 208, which has already affected some companies but will affect a number of companies moving here in the next several years. I’m not saying education doesn’t need more money– it clearly does — but this was a bad way to get it.”
At least two constitutional challenges to the measure have been filed in court. Meanwhile, lawmakers are seeking ways to lessen the impact on small businesses and keep Arizona attractive to new investment if the law stands, Livingston said.
“We’re having those discussions now and a lot of people are working really hard at figuring out how to deal with this. The way Proposition 208 is as it passed is unacceptable. It needs to be fixed and modified.”
Mitigating impact of Proposition 207 for employers
Another top priority in the upcoming session will be to take a close look at Proposition 207, which legalized adult recreational use of marijuana for adults 21 and older, Livingston said.
Employers are calling on legislators to find ways to protect the workplace and business owners from legal liability. They are worried about workplace errors, injuries and accidents and less productivity on the job. Trade organizations like the Arizona Trucking Association are concerned about more impaired drivers on Arizona roads.
Opponents said it is written in such a way that employers will have difficulty taking adverse action against employees.
The committee will be looking at ways to improve the new law to help protect employers as well as provide protections for consumers, particularly medical patients, who use the products, Livingston said.
The 17-page law is confusing for employers who need clarity, he said. Lawmakers also need clarity on how the state will access the sales tax the new law will generate.
“This is not my specialty, so I’m hoping someone will take the lead on it. We need some general reforms so we can manage it better, not to eliminate it because the voters have spoken,” Livingston said.