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style='tab-interval:.5in'> <div class=Section1> <p class=MsoNormal style='margin-left:120.0pt;text-indent:-120.0pt;tab-stops: 120.0pt;mso-layout-grid-align:none;text-autospace:none'><b><span style='font-family:"Calibri","sans-serif";mso-bidi-font-family:Calibri; color:black'>From:<span style='mso-tab-count:1'>                              </span></span></b><span style='font-family:"Calibri","sans-serif";mso-bidi-font-family:Calibri; color:black'>The Arizona Free Enterprise Club [michelle@azfreeenterpriseclub.org]<o:p></o:p></span></p> <p class=MsoNormal style='margin-left:120.0pt;text-indent:-120.0pt;tab-stops: 120.0pt;mso-layout-grid-align:none;text-autospace:none'><b><span style='font-family:"Calibri","sans-serif";mso-bidi-font-family:Calibri; color:black'>Sent:<span style='mso-tab-count:1'>                               </span></span></b><span style='font-family:"Calibri","sans-serif";mso-bidi-font-family:Calibri; color:black'>Thursday, February 26, 2009 11:02 AM<o:p></o:p></span></p> <p class=MsoNormal style='margin-left:120.0pt;text-indent:-120.0pt;tab-stops: 120.0pt;mso-layout-grid-align:none;text-autospace:none'><b><span style='font-family:"Calibri","sans-serif";mso-bidi-font-family:Calibri; color:black'>To:<span style='mso-tab-count:1'>                                   </span></span></b><span style='font-family:"Calibri","sans-serif";mso-bidi-font-family:Calibri; color:black'>greg@azcpa.org<o:p></o:p></span></p> <p class=MsoNormal style='margin-left:120.0pt;text-indent:-120.0pt;tab-stops: 120.0pt;mso-layout-grid-align:none;text-autospace:none'><b><span style='font-family:"Calibri","sans-serif";mso-bidi-font-family:Calibri; color:black'>Subject:<span style='mso-tab-count:1'>                          </span></span></b><span style='font-family:"Calibri","sans-serif";mso-bidi-font-family:Calibri; color:black'>Policy Matters 2-26-09<o:p></o:p></span></p> <p class=MsoNormal><o:p>&nbsp;</o:p></p> <div align=center> <table class=MsoNormalTable border=1 cellspacing=1 cellpadding=0 width=600 style='width:6.25in;mso-cellspacing:.7pt;border:solid black 1.0pt;mso-border-alt: solid black .75pt;mso-yfti-tbllook:1184'> <tr style='mso-yfti-irow:0;mso-yfti-firstrow:yes'> <td style='border:none;padding:.75pt .75pt .75pt .75pt'> <p class=MsoNormal><a href="http://azfec.org" target="_blank" title="The Arizona Free Enterprise Club"><span style='text-decoration:none; text-underline:none'><img border=0 id="_x0000_i1025" src="http://azfec.org/azfec-newsletter-header.jpg"></span></a></p> </td> </tr> <tr style='mso-yfti-irow:1'> <td style='border:none;padding:3.75pt 7.5pt 3.75pt 7.5pt'> <p align=center style='text-align:center'> The Free Enterprise Club has been the driving force behind<br> sound fiscal and pro-growth tax policy in Arizona. ---Steve Forbes</p> <ul type=disc> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt: auto;mso-list:l0 level1 lfo1;tab-stops:list .5in'><a href="#Budget_Blues">Budget Blues Present Tax Reform Opportunity</a></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt: auto;mso-list:l0 level1 lfo1;tab-stops:list .5in'><a href="#The_Laffer_Plan">The Laffer Plan for AZ</a></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt: auto;mso-list:l0 level1 lfo1;tab-stops:list .5in'><a href="#The_Good__the_Bad___the_Ugly">The Good, the Bad &amp; the Ugly</a></li> <li class=MsoNormal style='mso-margin-top-alt:auto;mso-margin-bottom-alt: auto;mso-list:l0 level1 lfo1;tab-stops:list .5in'><a href="#Odds___Ends">Odds &amp; Ends: Steve Voeller Testifies in House Ways &amp; Means Committee</a></li> </ul> </td> </tr> <tr style='mso-yfti-irow:2'> <td style='border:none;padding:30.0pt 7.5pt 30.0pt 7.5pt'> <p class=MsoNormal><a name="Budget_Blues"><b>Budget Blues Present Tax Reform Opportunity</b></a><br> <br> We think Arizona should be cutting taxes.&nbsp; Yes, we are well-aware of the budget constraints the legislature faces.&nbsp; We know we can t run deficits like the federal government can (and boy can they), but with California essentially escorting their residents out the door (see below), someone has to welcome them with open arms.&nbsp; We should lead the welcoming committee.&nbsp; But if we can t cut taxes, we should at least not miss this opportunity to reform the tax code.&nbsp;&nbsp;&nbsp; And we re <a href="http://azfec.org/research/Tax_Foundation_Special_Report_2-09.pdf">not the only ones</a> who believe this.&nbsp; By instituting some pro-growth reforms, Arizona can generate strong and more stable revenue while increasing our competitiveness.<br> <br> The Club outlined our tax policy priorities a few weeks ago in our Fiscal Note, <a href="http://azfec.org/research/FiscalNote_1_8_09.pdf">Economic Stimulus: What to Embrace, What to Avoid</a>.&nbsp; The corresponding bills have been introduced at the legislature: state equalization property tax repeal and state capital gains tax reduction by Sen. Waring (SB1107 and SB1405), corporate income tax rate reduction by Sen. Leff (SB1324), and business personal property tax reductions by Rep. Murphy (HB2361, HB2362, HCR 2012, HCR 2013).&nbsp; Read the Club s summaries on the <a href="http://azfec.org/files/pdf/2009_Capital_Gains.pdf">capital gains</a> and <a href="http://azfec.org/files/pdf/2009_Corporate_Income.pdf">corporate income</a> tax cut. <br> <br> How can even modest tax reforms that include rate reductions be financed?&nbsp; They can be financed through spending control. &nbsp;<br> <br> It s been well documented that total spending in Arizona has risen at an alarming pace from $13.4 billion in 2000 to $26.1 billion in 2007.&nbsp; This 94.7% spending surge exceeded the 43.3% combined growth of population and inflation over this same time.<br> <br> Making necessary, albeit difficult, budget cuts now to realign spending to population growth and inflation will result in significant tax savings as revenues begin to return to historical averages.&nbsp; These savings can, and should, be applied to pro-growth tax reforms.<br> <br> Related Reading: <br> Tax Foundation Special Report: <a href="http://azfec.org/research/Tax_Foundation_Special_Report_2-09.pdf">State Budget Shortfalls Present A Tax Reform Opportunity</a><br> <br> <br> <a name="The_Laffer_Plan"><b>The Laffer Plan for AZ</b></a><br> <br> The Goldwater Institute and the Free Enterprise Club commissioned renowned economists Dr. Art Laffer, Donna Arduin, and Wayne Winegarden, Ph.D. to analyze Arizona s tax code.&nbsp; The results of their analysis are published in the new GI report: <a href="http://www.goldwaterinstitute.org/Common/Img/02242009%20Laffer-Taxes.pdf"><i>How to Restructure Arizona s Tax Code: A Smarter, Flatter Tax Plan to Create Jobs</i></a>. <br> <br> The report recommends Arizona scrap its current tax code in favor of a 3.34 percent flat-rate tax based on both income and business value added (Value Added Tax).&nbsp; The report also offers a more gradual approach to tax reform, including phasing in reductions in corporate income, capital gains and property taxes, and eliminating all but the top seven revenue generating taxes.<br> &nbsp;<br> The report highlights Arizona s competitive regional environment.&nbsp; It s not enough to simply rely on our warm weather.&nbsp; Texas and Nevada do not have income taxes.&nbsp; Colorado and Utah have a flat tax.&nbsp; New Mexico has made great strides in reducing its top income tax rate near Arizona s rate.&nbsp; By comparison, Arizona s combined local and state sales tax rate is higher than any of our neighbors (including California), our capital gains taxes are too high, our corporate income tax rate is uncompetitive and we have the most punishing commercial property tax in our seven state region. <br> <br> To read the full report, please click <a href="http://www.goldwaterinstitute.org/AboutUs/ArticleView.aspx?id=2531">here</a> to visit the Goldwater Institute s website. <br> <br> <br> <a name="The_Good__the_Bad___the_Ugly"><b>The Good, the Bad &amp; the Ugly</b></a><br> <br> <b><u>Good:</u></b>&nbsp;  As difficult as these decisions may be, and as painful as they may feel in the short term, reducing spending is necessary and the most responsible way to preserve the long-term vitality of our state. We hear it all the time:  If a family should be forced to reduce its budget in bad times, so should government.   Sen. Russell Pearce, Chairman of the Senate Appropriations Committee.&nbsp; Click <a href="http://www.azcentral.com/arizonarepublic/opinions/articles/2009/02/10/20090210pearce10.html">here</a> to read his entire editorial.<br> <br> <b><u>Bad:</u></b>&nbsp; Emulating California.&nbsp; California recently fixed their $42 billion budget hole with spending cuts, borrowing, and a <u>$14 billion tax hike</u>.&nbsp; Fire up the moving vans.&nbsp; The mass exodus is sure to continue (California has lost residents four years in a row and last year lost 144,000 residents the most in the country by far).&nbsp; Arizona should hang a huge  Open for Business sign to welcome the transplants, entrepreneurs, and frustrated business owners.&nbsp; The tax reforms discussed above would certainly illuminate that sign. Unfortunately, we risk losing this opportunity given how the discussion of tax increases continues to gain traction.&nbsp; Visit our <a href="http://azfec.org/index.php?option=com_content&amp;task=view&amp;id=37">Who wants to raise your taxes?</a> page for all the latest.&nbsp; And make sure you ve signed the <a href="http://azfec.org/nonewtaxes">No New Taxes petition</a>  and encourage your friends to sign as well.<br> <br> Click <a href="http://azfec.org/press/pr/pr-2-19-09.pdf">here</a> to read how California s meltdown can be a boon for Arizona.<br> <br> <b><u>Ugly:</u></b>&nbsp; The head of the Arizona AFL-CIO says that she may head up an initiative to revoke Arizona s right-to-work status. Yeah, good luck. Whether voters understand the intricacies of collective bargaining or not, right-to-work is extremely popular and abolishing it would be about as difficult as abolishing baseball and apple pie. Even more detrimental to the union s case is the fact that the director says that her effort is essentially payback for legislative efforts to prevent union dues from being used in political campaigns. The unions spent oodles of their dues in campaigns against many of the current lawmakers.&nbsp; Payback stinks.<br> <br> <br> <a name="Odds___Ends"><b>Odds &amp; Ends</b></a><br> <br> <b>February 12, 2009  Budget Update, Freddy Krueger Style </b><br> The Joint Legislative Budget Committee gave a revenue update to the House and Senate Appropriations committees. It wasn t pretty.&nbsp; January revenues were 21.5 percent below last year.&nbsp; Even worse, the two year January decline was 35.9 percent.&nbsp; Where does this leave us?&nbsp; With revenue numbers even lower than expected, an additional shortfall between $250 and $425 million is projected for fiscal year 2009.&nbsp; Legislators will likely have to go back and tweak the budget fix they just finished.&nbsp; The deficit is like a horror movie where the bad guy just won t die. &nbsp;<br> <br> <b>February 23, 2009  Steve Voeller Testifies in House Ways &amp; Means Committee</b><br> The Club was invited to testify on HB2368, an omnibus tax reform bill, in front of the House Ways &amp; Means Committee.&nbsp; Our priority bills mentioned above were grouped together by Rep. Murphy, Chairman of Ways &amp; Means, to facilitate a big-picture discussion on broad-based tax reform.&nbsp; The Club highlighted the <a href="http://azfec.org/files/pdf/Tax_Foundation_10_Principles.pdf">10 Principles of Sound Tax Policy</a>, as well as how Arizona s tax policy stacks up against neighboring states.&nbsp; To read Voeller s testimony, click <a href="http://azfec.org/files/pdf/TESTIMONY_2-23-09.pdf">here</a>.<br> <br> <b>Twitter.&nbsp; Follow the Club</b><br> We re starting to get used to the old Twitter account now that we ve figured it out.&nbsp; <a href="http://twitter.zendesk.com/forums/10711/entries/13920">Twitter</a> is the best way to keep up with everything that s happening with the AZFEC.&nbsp; We promise not to spam you  we average one update a day.&nbsp; Click <a href="https://twitter.com/signup">here</a> to set up your Twitter account (it s easy), and then click the  add button next to  follow. &nbsp; Type in  AZFEC to add us to your list.&nbsp; If you d like to receive our Twitter updates via text message, update the  devices tab under  settings on your Twitter page. <br> <br> Policy <i>Matters</i> is distributed twice a month during the legislative session, and once a month otherwise.&nbsp; That s it.&nbsp; Management s rule.&nbsp; Click <a href="http://azfec.org/newsletter/user/login.php">here</a> to unsubscribe.</p> </td> </tr> <tr style='mso-yfti-irow:3;mso-yfti-lastrow:yes'> <td style='border:none;padding:.75pt .75pt .75pt .75pt'> <p class=MsoNormal><a href="http://azfec.org" target="_blank" title="The Arizona Free Enterprise Club"><span style='text-decoration:none; text-underline:none'><img border=0 id="_x0000_i1026" src="http://azfec.org/azfec-newsletter-footer.jpg"></span></a></p> </td> </tr> </table> </div> <p class=MsoNormal><span style='font-size:10.0pt;font-family:"Calibri","sans-serif"; mso-ascii-theme-font:minor-latin;mso-hansi-theme-font:minor-latin;mso-bidi-font-family: "Times New Roman";mso-bidi-theme-font:minor-bidi'><o:p>&nbsp;</o:p></span></p> </div> </body> </html>