10 minute read
Legislative Update
What’s at Stake?
The PRO Act could change the way all industry does business in Arizona
The PRO Act (Protecting the Right to Organize; HR 842/S 420) attempts to increase union density and union leverage without regard for the negative impacts it would have on workers, businesses and the entire American economy.
Currently 94% of Arizona businesses are merit shop (open or non-union shop), with union workers making up 6% of the state’s workforce. As this article is being written, Arizonans have freedom to choose if they would like to participate in an open shop or a union shop. The open shop’s upward mobility, fair wages, work opportunities and labor practices have proven to be the better choice for 94% of the workers who have had to make this decision.
Arizonans are individuals who make their own decisions and are responsible for their own actions. Individual rights are extremely important, and the pathways to the pursuit of life, liberty, happiness and personal property should be individually decided. Arizonans have been clear on these decisions, and the result is a vigorous economy that is poised for not only an economic rebound but also an economic boom.
Our state’s economic future is at risk if the PRO Act becomes federal law. All sectors of the economy would be at risk.
Workers and businesses that have built strong relationships and business models would have to completely restructure to an uncertain future. Repealing right-to-work protections would strip millions of Americans of the right to refrain from joining a union, hindering private sector growth and business migration to pro-business states such as Arizona.
The PRO Act also would strip personal privacy from employees as their personal information, including home address, cell phone number, assigned work shift information and more, would be provided to organizers so they could freely contact the employees. In addition, the death of the secret ballot is included in this act. “Card Check” is the organizers’ preferred way to run an election as the employee’s individual vote is made public, opening the election to acts of intimidation.
Not only is the PRO Act an attack on individual freedoms, but it is also an attack on employers’ abilities to protect their own interests. It interferes with attorney-client confidentiality and makes it harder for businesses, especially small businesses, to secure legal advice on complex labor law issues. The inequity of this act targets small business for future failure.
The act also attacks independent contractors by curbing opportunity in the new gig economy. Many of those independent contractor opportunities would be sent overseas to other nations that are eager for the work. Research study from the American Action Forum estimates that up to 8.5% of the gross national product would be at risk if the PRO Act’s “ABC” Test is nationalized. Under this test, a worker is presumed to be an employee unless the employer can show that certain conditions are met. Assembly Bill 5 is California’s provision that reclassifies independent contractors. A statute such as this in Arizona would devastate our high-tech sector, and any efforts to bring high-tech to our state would be in vain.
The PRO Act’s removal of secondary boycott protections will lead to “topdown” organizing efforts as many owners, suppliers, contractors and specialty contractors would be at risk for boycotts and business stoppages. This is just the tip of the iceberg. For more details visit opposetheproact.com.
Tom Dunn
ABA
Tom Dunn is president of the Arizona Builders Alliance.
The Big Three
It’s been a year of change for all Arizona residents, businesses and organizations. Our state legislature is no different. Lawmakers went back to work in January as COVID-19 cases spiked throughout the state. They adjusted by allowing remote voting and public testimony. At the time of publishing this article, the Capitol remains off limits to the public, but legislators are still in session doing the work of the people.
To date, the Arizona Legislature has passed several bills of significance to economic developers. Still more economic development issues are wrapped up in the fiscal year 2022 state budget currently under negotiation. Following are the big issues lawmakers are addressing this year.
QUALIFIED FACILITIES
Without question, the biggest economic development bill this year was the Qualified Facilities bill, HB 2321. This bill targets large-scale projects in Arizona by increasing the tax credit for qualified facilities from $70 million to $125 million in any calendar year. The program, run by the Arizona Commerce Authority (ACA), is extended until October 1, 2033. This legislation is designed to attract projects such as Taiwan Semiconductor and the $20 billion expansion of the Chandler Intel plant. These megaprojects have a multiplier effect throughout the state’s economy and create high-wage jobs.
Carrie Kelly
AAED
ANGEL INVESTMENT TAX CREDIT
Since its inception, more than 1,000 Arizona businesses have used the Angel Investment Tax Credit. The program is available to expand early-stage investments in targeted Arizona small businesses. The tax credit offsets Arizona capital gains tax liabilities associated with the disposition of investments in small businesses certified by the ACA. The program is up for reauthorization and is currently in the Senate version of the proposed budget.
TAX REFORM
Lawmakers are considering flattening the Arizona personal income tax system. Currently, Arizona has four personal income tax brackets. Legislators are discussing collapsing the four into one as part of the budget negotiations.
At issue is the impact that Prop 208 has on small businesses.
Arizona voters narrowly passed Prop 208 in November 2020. The proposition adds a 3.5% surcharge onto the highest tax bracket in Arizona and dedicates the revenue to education. This policy was designed to infuse cash into the K-12 system. However, it is causing high-wage earners to move out of the state and hitting small businesses rather hard.
Many small businesses in Arizona are structured as Sub S corporations or LLCs. This allows the business tax liability to flow through to the owners regardless of personal income. In short, small businesses are significantly impacted by the policy, and lawmakers are trying to address the problem.
If taxes are flattened, anyone with a tax liability greater than $250,000 for a single filer or $500,000 for joint filers would pay 6% with the Prop 208 surcharge included. This would help keep the state competitive with others and help small businesses.
Legislators are also discussing the impact of the reforms on Arizona cities and towns. If not adjusted, local governments could see a reduction in the amount of shared revenues they receive from the state. The debate continues at the Capitol and, hopefully, a reasonable solution can be found.
AAED continues to advocate for policies that make Arizona more attractive for business and job creation.
Carrie Kelly is the Executive Director of the Arizona Association for Economic Development.
Time for Bold Leadership
It’s been quite the session at the Arizona State Legislature. At the time of this writing, the legislature is bogged down in budget negotiations and facing a June 30 deadline, finishing up an audit of the 2020 election that has garnered national attention, and entering a Special Session to address wildfires that are ravaging parts of our beautiful state.
So where do we go from here?
With multiple candidates already declaring their intent to run for statewide offices, such as governor and secretary of state, as well as U.S. Congressional and Senate seats in 2022, the business community has the responsibility to step up and support candidates who will work to solve real problems facing Arizona. Far from being the bogeyman that some would paint all businesses, Arizona is fortunate to be home to large corporations, small local merchants and innovative entrepreneurs that have a vested stake in the long-term vitality of our state’s economy and quality of life.
To move forward, we need a bold, cohesive effort to elect politicians who will rise above petty partisanship and work towards solutions that will balance the need for competitive tax policy and a predictable regulatory environment with prudent investments in core government functions, such as education, health care, corrections, securing our water supply, restoring our forests to prevent catastrophic wildfires, and modernizing our infrastructure. These are major responsibilities that cannot be ignored to fight ideological battles.
This may sound impossible in today’s environment when an angry tweet can destroy a person’s career. But Arizona has a long legacy of political and business leaders from both parties who have demonstrated statesmanlike behavior and a willingness to negotiate consensus public policy.
Suzanne Kinney
NAIOP
What can business leaders do to help restore a more functional political environment?
For starters, financially support candidates who have proven to put the needs of Arizona’s residents above partisan gain, even when that has meant risk to their political careers.
Stop supporting candidates who may vote “the right way” on legislation that impacts your business but then engage in activities that distract from the hard work of policy-making or cause our state to make the national or international news in a negative way.
Hold accountable elected officials who stymie action on major issues, such as setting the state budget in order to force a vote on a personal priority that lacks broad support.
Connect directly with elected officials. Legislators want to hear from business leaders in the field. They meet with professional lobbyists every day but would benefit from more real-life stories of what causes businesses to struggle and what the legislature can do to help.
Finally, closely watch and get involved in the redistricting process. The Independent Redistricting Commission (IRC) is a small body appointed after the decennial census to reset all state legislative districts and U.S. Congressional districts for the next decade. This will have major implications for the competitiveness of districts and the representation available to diverse rural and urban communities across our state.
When too many districts are uncompetitive in the general election (meaning one party is assured to prevail due to a registration advantage), the election is decided in the primary. Held in late summer and garnering little attention, Arizona’s primaries are often a race to the extremes. The result is all too often a legislator who is focused on appeasing their base rather than serving the broader needs of the constituency in their district.
Pay attention to how these district lines are drawn so that Arizona can benefit from competitive campaigns where issues of real importance are debated in the open. In the end, this will lead to better policy-making and a brighter future for our state.
Suzanne Kinney is the president and CEO of Arizona Chapter of NAIOP, the Commercial Real Estate Development Association.
WHAT’S COMING IN C.R.E.?
AZRE Forum is bringing together Arizona’s most influential commercial real estate leaders for a mid-year industry update. Connect, learn and network with the most impactful commercial real estate leaders at the 2021 AZRE Forum.
Cliff David
Marcus & Millichap/IPA
Boston Chauthani
Taylor Street Advisors
THE CLAYTON HOUSE AUGUST 5 2021
3:00-6:00 PM
Colleen Cunningham
Gensler
Ben Darwin
CliftonLarsonAllen
BROKER PANEL COVID-19 IMPACT PANEL
Bob Mulhern
Colliers – Moderator
Laurel Lewis
NAI Horizon
Tony Lydon
JLL
Rob Martensen
Colliers
Patrick MacQueen
MacQueen & Gottlieb Moderator
Derek Flottum
Irgens
Kimberly Rollins
CPI/CORFAC International
Andrew Geier
Layton Construction
INDUSTRY OUTLOOK PANEL
Larry Pobuda
Opus Group – Moderator
Jamie Godwin
Stevens Leinweber
Ben Gottlieb
MacQueen & Gottlieb
Steven Hensley
Belfiore Real Estate Consulting
John Kinser Enterprise Bank
Kristen Stephenson
GPEC
Greg Vogel
Land Advisors
