The good news this week that Go Daddy is expanding its operations here and that Chief Executive Magazine now ranks Arizona as the sixth-best state to do business (up from 10th place last year) is no accident.
From the moment Gov. Jan Brewer took office, the state set in motion dramatic improvements to its tax and regulatory environment and its educational system, put safeguards in place to ensure the state lives within its means through pension reform and that it operates a more efficient state government by implementing smart personnel reforms.
In the same magazine rankings, California came in last for the ninth year in a row, with Texas remaining in the top slot. This is no shock. Texas has no income tax and a favorable regulatory climate, while California raises taxes and spends more time attempting to regulate the scourge of coffee, candy and soda.
The magazine interviewed 736 CEOs on three major topics: taxation and regulation; workforce quality; and living environment. Arizona scored well across the board. Among the highlights on the tax and regulatory front are the coming expiration of the temporary one cent sales tax, the defeat of last fall’s attempted $1 billion sales tax increase ballot measure and the nearing implementation of a reduction to corporate income and property taxes. The Arizona Chamber of Commerce and Industry played the lead role in the business community on all three items.
The happy recap of the past several years shows Arizona is moving the job creation needle in a big way.
- A 30 percent phased-in reduction of the corporate income tax;
- A reduction of property assessment ratio for business to 18 percent;
- Bonus depreciation for assets placed in service in 2012 that will result in a reduced tax burden on equipment purchases;
- A near doubling of the business personal property tax exemption to approximately $125,000;
- Income tax credits available for companies that create qualifying new jobs in the manufacturing or export-related industries;
- Reestablished job training funds;
- A 25 percent phased-in reduction of the capital gains tax;
- Net operating loss carry forward improved from five to 20 years;
- A 100 percent elective sales factor for manufacturers who produce in Arizona but sell most of their goods outside of Arizona;
- Ability for the government to share in the financing of necessary infrastructure for large manufacturing projects;
- A 100 percent elective sales factor for service industries;
- An improved research and development tax credit;
- A deal closing fund; and
- The creation of the Arizona Commerce Authority, now led by an outstanding president and CEO, Sandra Watson.
The regulatory and tort reform track record is equally impressive:
- Gov. Brewer implemented a regulatory moratorium upon taking office, which has since been extended;
- Licensees can petition the state to reduce state agency licensing timeframes;
- If a rule relies on scientific principles or methods based on a study, the rule must be based on valid scientific or reliable principles;
- An agency can use the summary rulemaking procedure to repeal obsolete, ineffective rules as long as the repeal does not increase the cost of compliance or reduce procedural rights of the entity regulated;
- Ban on punitive damages for companies that comply with applicable regulatory and safety standards and rules;
- Decreased likelihood of junk science being used as admissible evidence in the courtroom by increasing to the Daubert standard;
- Increased transparency when the Attorney General enters into contracts with private counsel on a contingent fee basis;
- Significant changes to address how appeal bonds are leveraged for settlements; and
- Two major audit privileges that encourage business to discover and correct problems relating to environmental, health and safety issues.
On the workforce front, Gov. Brewer has shared the business message with policymakers that a strong education system is workforce development. Our growing list of educational assets includes:
- One of this country’s most robust school choice systems;
- Prioritizing the need for students to be readers via Move on When Reading;
- Breaking up the one-size fits all approach to learning, with Move on When Ready; and
- Strong and transparent accountability measures.
We’re not resting on our laurels. The fight for jobs is a fierce one. This year alone, the Arizona Chamber:
- Is fighting for additional tort reform;
- Has secured a new regulatory reform measure;
- Is working for additional improvements to our tax code, including a major overhaul of the sales tax system;
- Is strongly supporting efforts to raise standards for our K-12 schools, including proper implementation of the Arizona Common Core standards and an aligned student performance assessment.
As one reads the CEO report, it becomes clear that while the poles – California and Texas – remain constant, there is a lot of movement from year to year. The lesson here is that we must always be vigilant. While the 300+ days of sunshine might be nice, we must always work to improve our tax and regulatory environment and strengthen policies to improve our workforce. The Arizona Chamber is on the case.
Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry