Glenn Hamer

The second regular session of the 50th Arizona Legislature opened this week and the Arizona Chamber of Commerce and Industry was back at the state Capitol representing the interests of the state’s job creators as we seek to make Arizona an even better place to do business.

This year opens on a more positive note than 2011. The latest numbers indicate that our state added 46,000 jobs in 2011 and year-to-date fiscal year 2012 revenues are up 8.2 percent over the same period in fiscal 2011.

But Arizona’s economic picture early last year was especially bleak. It was clear that our leaders would have to act decisively to send a message that our state was serious about getting back on firmer ground and in doing what it took to win back the 300,000 jobs we’ve lost in the downturn. Thankfully, Gov. Jan Brewer and our Legislature rose to the occasion in a big way.

While states like Illinois were targeting businesses for big tax increases to balance that state’s books (or some states like California have seemingly just given up), Arizona lawmakers and the governor enacted the nation’s most aggressive economic competitiveness package, which included a host of tax reforms and the creation of the Arizona Commerce Authority that is charged with selling our state as a great place for business to expand and invest.

Considering all the progress the business community made last year, it’s hard to believe that there are still areas where we can increase our competitive standing. But judging by Gov. Brewer’s economic agenda, it’s clear that she won’t be taking her foot off the gas of the state’s job creation machine.

On Wednesday at the Arizona Commerce Authority’s board meeting, the governor’s director of legislative affairs, Michael Hunter, rolled out a series of key initiatives that seek to make improvements to Arizona’s tax code in areas that need to be polished up in order to attract and retain good jobs.

We at the Chamber were pleased that the governor would like to see some reforms in the way the state taxes capital gains. The federal government and several other states extend more favorable treatment to capital gains than Arizona does, which treats capital gains like regular income. The feds, for example, extend a preferential rate to capital gains of only 15 percent at the high end, yet the top regular federal income tax rate is 35 percent.

As a September 2011 paper released by the Arizona Chamber Foundation found, evidence suggests that reductions to capital gains tax rates spurs economic growth by encouraging investment and generates incremental tax revenue as a result of that growth and the unlocking of pent up investment gains. We agree with the governor that Arizona can improve its economic environment by treating capital gains more like the federal government.

Another tax issue where the federal government actually has a better tax policy than we do at a state level is in the treatment of net operating losses. We support the governor’s desire to fix this anomaly by bringing Arizona businesses’ ability to carry losses forward against future profits somewhere closer to the federal government’s 20 years rather than the state’s current five-year policy. A net operating loss carryforward policy beyond five years would help make Arizona more favorable to start-ups that often have losses early in their lifespan.

At a legislative level, I was pleased to see that there has already been some progress in making Arizona’s tax code reflective of the increasingly service-based economy we live in. Senate Bill 1046, sponsored by Sen. Rick Murphy, passed the Senate Finance Committee on Thursday. The Chamber supports Sen. Murphy’s push to help ensure that service providers that sell out of state aren’t exposed to taxation on the same revenues here and in other states. The comments offered up at Wednesday’s presentation indicate that the governor also wants to improve the tax picture for service providers, just as she and the Legislature did last session for our manufacturers who sell their products across state lines.

One of the long term goals outlined in our 2012 Business Agenda is to simplify the tax system and reduce the burden on business of complying with different transaction privilege tax (what most states call sales tax) codes for each local jurisdiction. The governor is seeking to establish a task force to make recommendations by the end of this calendar year to alleviate taxpayer frustration, increase compliance and simplicity and help reduce redundancies. The TPT code is far too complicated and the governor is right to want to clean it up. Our friends at the Arizona Tax Research Association, led by Kevin McCarthy, deserve tremendous credit for their hard work in advancing this issue over the years.

This governor and this Legislature won’t be satisfied with flat economic numbers. Recent news that Silicon Valley Bank, a leading venture capital firm, will be moving over 200 jobs to Tempe is a sign that the ACA can land new jobs (and as I’ll write about at another time, kudos to U.S. Rep. David Schweikert for his assistance in touting Arizona as great place to do business) and that the state has the tools to grow our economy. As we head into Arizona’s next century, I believe that our economic recovery is underway.

Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry