Tax Breaks Thicker Than Thieves ... when industry sidles over for a handout

A billion here, a billion there, and pretty soon you're talking about real money.

--Senator Everett Dirksen

For $14 million, you could immunize every 2-year-old in Maricopa County against disease.

Or you could give the money to companies like Circle K, McDonald's and Fry's.

Last year, the Arizona Legislature did the latter. The so-called "Circle K Bill" passed as part of a package of tax cuts approved by the Legislature in a special session. You probably only heard about the vehicle-license-tax cut--also part of the same package--which was touted as a victory for the little guy, but will save the owner of a $20,000 car a paltry $78 the first year.

Meanwhile, the business community scored $90 million in tax cuts last year, including a reduction in the corporate income tax rate from 9 percent to 8 percent--and that Circle K Bill.

Here's the story: In 1996, Arizona voters approved an amendment to the state constitution that granted business owners an annual personal property tax exemption of up to $50,000 on items like farm or office equipment. You know, nuts and bolts stuff small businesspeople use to run their businesses.

After the bill passed, corporations with multiple business locations asked the Arizona Department of Revenue for a ruling as to whether they could get a $50,000 tax break for equipment purchased at each location. No, DOR said. The corporation is the taxpayer, and each taxpayer gets one $50,000 break.

So Super Lobbyists descended on the Capitol, looking to pass a law superseding DOR's opinion. They got it. Insiders say the law may be unconstitutional, but until it's challenged, it's the law.

Now for the sordid details of the $14 million tax gift. DOR estimates that beginning this year, the impact on the state general fund will be $5.4 million annually. The additional $8.6 million will be borne by cities, counties and community college districts. But those groups won't suffer--you will. To keep their income steady, the cities, counties and special districts will simply raise your taxes.

Phoenix Democratic Senator Chris Cummiskey sits on the Senate Finance Committee. He argued unsuccessfully against the Circle K Bill, which earned its nickname after Cummiskey asked, during the committee hearing, whether, for instance, Tosco, which owns about 550 Circle Ks in Arizona, could get a $50,000 tax break per store. He was told that it could. Cummiskey doesn't see the upside for his constituents.

"You know," he says, "the chips aren't going to get any cheaper. The six-pack's going to stay the same when you go into a Circle K."

Last year, Chris Cummiskey kept a tote board of corporate tax cuts that passed through the Senate Finance Committee. The total topped $450 million. Most of those bills died, but measures giving tax breaks worth tens of millions of dollars didn't.

The same process goes on in the House Ways and Means Committee. Legislators don't want to say no to lobbyists, Cummiskey maintains, so they let big business's tax-cut bills sail through committee. At least they can tell the lobbyist they tried.

The day the Circle K Bill passed the Senate Finance Committee, the lobbyists didn't even bother to speak in favor of it, although a powerful group showed up for the hearing. In attendance: John Mangum, Arizona Food Marketing Alliance; Samantha Fearn, National Federation of Independent Businessmen; Jim Norton, Arizona Chamber of Commerce; Michelle Ahlmer, Arizona Retailers Association; and Ian Calkins, Phoenix Chamber of Commerce.

The Circle K Bill was far-reaching. Most bills never actually mention a company's name--that wouldn't be kosher--but instead describe it in such narrow fashion that the law only applies to one company.

One such successful bill from last session belonged to Embry-Riddle Aeronautical University. The measure gives a tax exemption on leased and rented flight equipment to four-year nonprofit educational institutions that teach flying. Embry-Riddle is the only such university in the state. The estimated cost to taxpayers: about $83,000 a year.

"It's just one bill after another that is tailored to give a tax break to one organization over others," Cummiskey says.

One tax cut that got away from lobbyists last session was Glendale Republican Senator Scott Bundgaard's so-called "Cap Co" bill. The legislation would have given up to $150 million in tax credits over 10 years to insurance companies that invest in venture capital.

This is one of those rare bills the legislator claims as his own. Bundgaard says it was his own idea, but that after he first introduced it two years ago he got calls from businesses all over the country, offering to send lobbyists out to stump for the bill.

While the bill's critics say the only benefits will be to the insurance companies that get to invest their money instead of paying insurance premium fees--and the venture capitalists who get their hands on the money--Bundgaard believes it will lead to better jobs for Arizonans by creating new businesses. He says he's not pleased with the types of jobs available now.

"We don't want to have people aspire to get a minimum-wage job at a credit-card-processing facility," he says.

The bill almost passed last year--it went down in the final hours of the 1998 session--but Bundgaard is considering introducing it again in 1999.

Meanwhile, the Children's Action Alliance struggles mightily to get funding for its constituents. This year, the Children's Action Alliance is asking the Legislature for:

* $10 million to expand the state's Healthy Families program. Although funding is only $3 million a year and covers just 20 communities now, the program has been considered successful at reducing child abuse, improving children's health and increasing parents' self-sufficiency.

* $20 million to subsidize child care for working parents. More than half of the child care currently available in Arizona costs more than the maximum subsidy now offered.

* Money to help Child Protective Services. CPS now investigates almost 100 percent of reports of abuse and neglect, but the staff is still woefully overworked. And more than three-fourths of the abuse and neglect cases investigated and substantiated by CPS are closed immediately and never monitored.

The list goes on. Those immunizations for 2-year-olds in Maricopa County would be nice, too.

The Players
And their contributions to statewide and legislative candidates

For the "Circle K Bill" . . .

Super Lobbyist John Mangum, Law Offices of John Mangum. Mangum gave $12,167. His client on this issue: Arizona Food Marketing Alliance. The group and its employees gave nothing. Another client, Tosco (Owner of Circle K): $11,522.

Samantha Fearn, National Federation of Independent Businesses. She gave nothing. Her group's PAC gave $3,545.

Michelle Ahlmer, Arizona Retailers Association. Ahlmer gave $2,925. Employees of the association gave $375.

Jim Norton, Arizona Chamber of Commerce. Norton gave $1,850. Other chamber employees gave $1,987. In 1997, the state chamber's gifts to legislators totaled $1,174 for entertainment.

Ian Calkins, Phoenix Chamber of Commerce. Calkins gave $125. Other employees gave $1,225. The Phoenix chamber's PAC gave $3,050. In 1997, the Phoenix chamber's PAC spent $3,575 on entertainment for legislators, including $250 for the "Chamber Challenge" at Arrowhead Country Club; $570 for a "Power Breakfast" at the Arizona Biltmore; $175 for a "Legislative Wrap-up at Phoenix Country Club; and $650 for a "Manufacturing Dinner" at the Sheraton Crescent.

Against the "Circle K Bill" . . .

No lobbyists spoke out against the bill in the Senate Finance Committee.

The Children's Action Alliance has no PAC. Its employees gave $1,320.

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Amy Silverman is a two-time winner of the Arizona Press Club’s Journalist of the Year award. Her work has appeared on the radio show This American Life and in the New York Times, the Washington Post, Lenny Letter, and Brain, Child. She’s the co-curator of the live reading series Bar Flies, and a commentator for KJZZ, the NPR affiliate in Phoenix. Silverman is the author of the book My Heart Can’t Even Believe It: A Story of Science, Love, and Down Syndrome (Woodbine House 2016). Follow her on Instagram (@amysilverman), Twitter (@amysilvermanaz), and at amy-silverman.com.