The Tax Foundation

June 24, 2008

Arizona's Special Interest Laundry List

by Josh Barro and Joseph Henchman

A new Tax Foundation Fiscal Fact examines a package of proposed subsidies and special tax breaks for favored industries, currently under consideration in the Arizona state legislature. Typically, with packages of lobbyist-driven handouts such as these, the actual value to state residents is inversely proportional to the sponsors' soaring language regarding their benefits. So when Arizonans are told that the package's effects will be "bringing in new manufacturing jobs, revitalizing urban areas, attracting tourists, maintaining or expanding the Cactus League and stabilizing the construction market," they should check to make sure they are still in possession of their wallets.

The Arizona State House's press release announcing the proposals grandly reports that "no current general fund money would be used for the projects." Technically, that's true. However, the difference between the government (1) collecting a tax and then cutting a check to a favored business, or (2) exempting that favored business from a portion of its tax liability, is a difference in accounting only. These programs will impose significant costs on Arizona's general fund in the form of tax revenues foregone. In many cases, the special tax benefits will go to businesses or projects that would have existed with or without the new laws, representing a true loss of otherwise-collected revenue.

Read the Tax Foundation Fiscal Fact. Learn more about taxes in Arizona.