NFIB scores big victory for small business on tax conformity
State Director Chad Heinrich reports on the small-business agenda at the close of the session
The budget package that was agreed to by the legislative leadership and Gov. Doug Ducey included two key policy priorities for NFIB: First being conformity of Arizona’s income tax code with the federal Tax Cuts and Jobs Act; second, simplifications to the Arizona sales tax code (transaction privilege tax) that will create tax parity for local retailers and out-of-state remote sellers.
Income Tax Conformity
This plan, House Bill 2757, offered Arizona policymakers a rare opportunity to enact reforms simplifying Arizona’s income and transaction privilege tax codes for small-business owners.
News Release: NFIB Praises Tax-Conformity and Transaction Privilege Tax Simplification
NFIB was a key supporter of the federal Tax Cuts and Jobs Act (TCJA) in 2017. The Tax Provisions Omnibus is consistent with important parts of the TCJA that will simplify filing for many Arizona taxpayers. Under the proposed changes, as many as 90% of taxpayers could be taking the standard deduction on both their state and federal forms, creating a much simpler filing process. This is done through significantly increasing the standard deduction for single and married taxpayers to mirror the federal law. The plan also includes income tax rate reductions for all taxpayers and reduces the number of income tax brackets from five to four (flattening the income tax base) which has not been done since 1990 in Arizona.
Sales Tax and the Wayfair Decision
Last year, the U.S. Supreme Court gave the green light to states to start taxing online sales made by out-of-state sellers when it ruled on South Dakota v. Wayfair. The introduced version of the Wayfair legislation raised concerns for NFIB members. We are thankful for the opportunity to work with the sponsor and stakeholders in revising the legislation to remedy the issues that we identified. The revised version simplifies the Arizona retail tax base in a way that is fair to remote sellers—many of which are small businesses. NFIB was a key advocate of changes adopted in 2013 that moved the state to a single point of collection and audit. The changes included in this legislation will simplify the system that small retail businesses face when conducting business in the state and will reduce the State’s risk of litigation when implemented.
Universal Recognition of Occupational Licenses
NFIB stalwart, Rep. Warren Petersen, championed one of Governor Ducey’s policy priorities in sponsoring the nation’s first universal recognition of occupational licenses in Arizona. This will enable incoming workers to our state a fast track into employment in their trade or occupation by Arizona’s recognition of their existing state license without having to re-apply and re-take all the licensing exams they already completed in the state from which they are moving.
News Release: NFIB Applauds Governor’s Signing of Universal Licensing Bill
Initiative petition signature-gathering fraud
Senate Bill 1451 went down to the wire, but the bill to implement important new anti-fraud measures in the initiative petition signature-gathering process passed and is on Gov. Ducey’s desk. The bill:
- makes reforms in the attestations that paid initiative petition circulators make to the secretary of state
- clarifies the consequences for failure to comply with the rules
- makes clear the qualifications as to who can be a paid petition circulator, preventing those individuals who have been convicted of felonies but have not had their civil rights restored and/or have been convicted of fraud, forgery, or identity theft from gathering signatures for pay.
Taxation of Digital Services
Despite reams of evidence and several high-profile large companies mounting legal challenges, the legislation aimed at clarifying what digital goods are taxable and clearly exempting digital services from sales tax did not receive a vote on the Senate floor and therefore died for the second year.
Bloomberg Tax did a fair job of covering the issue in this recent article where NFIB State Director Chad Heinrich is quoted. You’ll remember a poll NFIB commissioned early this year that showed overwhelming opposition from likely voters against what the Department of Revenue is doing without legislative authority. Because of the several lawsuits and an unwillingness by Senate Leadership to move forward. it is unlikely that there will be another legislative push toward resolving this issue. The state stands to lose millions in revenue for past periods and moving forward in perpetuity if the court finds in favor of the plaintiff companies.
Youth Employment
Championed by the Goldwater Institute and supported by the broader business community. NFIB supported Rep Travis Grantham’s proposal to open further job opportunities up to full-time students under 21 years of age who would be willing to work for the federal minimum wage rather than the state minimum, which is headed toward being over 60% higher.
This innovative policy proposal did not attempt to amend the initiative proposition that focuses on full-time workers and families. Instead, the policy focused on young students working on a casual basis. Unfortunately, the bill was interpreted by the legislative council and the attorney general as running afoul of the voter-protected minimum wage initiative and would have required a three-fourths vote in the Legislature to pass. For these reasons the measure did not move forward once it passed committee in the Senate.
