The cost of cuts: Arizona tax carve-outs last year hit $13.7B
By Jim Small and Evan Wyloge | Arizona Center for Investigative Reporting
PHOENIX – Teachers who marched on the Capitol this past week in support of doubling the salary boost that lawmakers were considering went home empty handed, as Republican lawmakers backed a budget proposal that grants them a two-percent increase over the next two years, saying there simply wasn’t money available.
The cost of doing so would have been an additional $34 million per year in the first year and $68 million in the second, a tiny fraction of the $9.8 billion spending plan approved May 5.
But that figure is dwarfed by how much tax revenue the state doesn’t collect each year: In fiscal year 2016, state law allowed $13.7 billion in taxes to go uncollected through a litany of exemptions, deductions, allowances, exclusions or credits. And that number is likely to grow by another $1-to-2 billion once individual income tax deductions are tallied.
According to data compiled by the Arizona Department of Revenue, more than half of all state taxes haven’t been collected for at least the past ten years. Called “tax expenditures,” they amount to $136.5 billion since fiscal year 2007 – roughly equivalent to sum of state budgets spanning the past 15 years.
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2007 – 2016 tax expenditures by type
TAX TYPE | VALUE OF FY16 EXPENDITURES | VALUE OF FY15 EXPENDITURES | VALUE OF FY14 EXPENDITURES | VALUE OF FY13 EXPENDITURES | VALUE OF FY12 EXPENDITURES | VALUE OF FY11 EXPENDITURES | VALUE OF FY10 EXPENDITURES | VALUE OF FY09 EXPENDITURES | VALUE OF FY08 EXPENDITURES | VALUE OF FY07 EXPENDITURES |
---|---|---|---|---|---|---|---|---|---|---|
AIRCRAFT LICENSE TAX EXPENDITURES | $5,032,946 | $4,985,055 | $5,237,479 | $5,509,385 | $3,095,615 | $2,084,593 | $2,479,951 | $1,523,378 | $854,854 | $921,600 |
AVIATION FUEL TAX EXPENDITURES | $162,479 | $149,151 | $200,361 | $63,474 | $88,549 | $92,922 | $64,269 | $63,999 | $40,198 | $11,291 |
BINGO TAX EXPENDITURES | $73,028 | $70,960 | $72,180 | RANGE: $9,894 - 122,848 | RANGE: $10,066 - $122,224 | $115,562 | $112,500 | RANGE: $11,350 - $115,756 | RANGE: $16,250 - $100,300 | RANGE: $14,000 - $117,000 |
BOXING & MIXED MARTIAL ARTS TAX EXPENDITURES | $3,510 | $3,330 | $2,393 | $780 | $1,020 | $1,350 | $1,425 | $2,092 | $2,000 | $3,000 |
CORPORATE INCOME TAX EXPENDITURES | $133,477,546 | $132,899,546 | $460,328,800 | $114,379,124 | RANGE: $310,788,000 - $354,588,000 | $314,863,700 | $187,617,700 | $237,019,914 | $285,615,371 | $89,531,000 |
FIDUCIARY INCOME TAX EXPENDITURES | $53,703,660 | $32,067,130 | $25,482,180 | $16,238,279 | $15,755,607 | $16,118,150 | $26,942,943 | $29,646,534 | $20,940,976 | $35,143,579 |
FLIGHT PROPERTY TAX EXPENDITURES | $2,536,654 | $939,316 | $1,160,836 | $900,812 | $1,516,123 | $1,953,607 | $2,001,723 | $2,436,567 | $3,953,457 | $6,619,415 |
INDIVIDUAL INCOME TAX EXPENDITURES | $375,651,568 | $310,643,144 | $2,233,441,000 | $255,280,000 | $244,660,000 | $1,987,662,000 | $2,219,662,000 | $1,957,121,000 | $2,166,308,000 | $1,935,253,000 |
INSURANCE PREMIUM TAX EXPENDITURES | $241,218,934 | $242,399,848 | $192,143,864 | $205,251,402 | $199,799,610 | $187,803,012 | $129,100,469 | $194,628,617 | $176,187,264 | $159,951,660 |
JET FUEL EXCISE AND USE TAX EXPENDITURES | $6,164,499 | $6,635,958 | $5,131,667 | $6,213,031 | $6,524,014 | $7,895,136 | $7,597,099 | $6,782,105 | $8,161,586 | $8,278,846 |
LUXURY TAX EXPENDITURES | $14,597,098 | $38,433,557 | $23,095,734 | $440,305,626 | $439,559,322 | $19,316,561 | $13,699,267 | $452,778,717 | $471,489,841 | $479,588,433 |
MOTOR CARRIER FEE EXPENDITURES | $157,993,764 | $153,633,293 | $146,508,936 | $143,829,818 | $143,357,849 | N/A | N/A | N/A | N/A | N/A |
MOTOR VEHICLE FUEL TAX EXPENDITURES | $12,446,181 | $10,974,015 | $9,159,048 | $9,250,359 | $8,971,864 | $7,427,328 | $6,872,750 | $6,231,754 | $7,714,558 | $6,501,703 |
PARI-MUTUEL TAX EXPENDITURES | $3,775,986 | $4,016,340 | $4,032,441 | $4,126,235 | $4,362,684 | $4,372,304 | $5,103,187 | $6,161,565 | $8,398,010 | $9,166,397 |
PRIVATE CAR PROPERTY TAX EXPENDITURES | $384,354 | $312,407 | $425,322 | $408,268 | $354,940 | $301,413 | $320,420 | $215,426 | $154,066 | $195,483 |
PROPERTY TAX EXPENDITURES | $403,693,834 | $377,979,585 | $359,909,184 | $328,874,395 | $322,669,313 | $338,142,925 | $388,598,989 | $423,642,708 | $403,635,384 | $366,134,820 |
SEVERANCE TAX EXPENDITURES | $15,196,006 | $24,862,000 | $26,190,000 | $29,829,000 | $40,580,000 | $40,236,000 | $29,100,000 | $18,210,000 | $43,750,000 | $43,550,000 |
TRANSACTION PRIVILEGE AND USE TAX EXPENDITURES | $12,262,397,152 | $12,212,283,076 | $12,611,204,000 | $12,107,810,000 | $11,540,920,000 | $10,034,020,000 | $11,282,560,000 | $9,509,380,000 | $10,095,961,000 | $9,139,532,000 |
USE FUEL TAX EXPENDITURES | $45,731,318 | $43,621,085 | $45,526,448 | $44,186,840 | $47,752,045 | $42,195,849 | $40,513,612 | $52,167,262 | $18,513,943 | $29,414,001 |
WORKERSÛª COMPENSATION PREMIUM LIEU TAX EXPENDITURES | $1,251,000 | $1,809,939 | $4,995,967 | $2,180,526 | $2,512,473 | $12,738,142 | $16,588,835 | $6,800,000 | $2,976,526 | $2,507,346 |
TOTAL | $13,735,491,517 | $13,598,718,735 | $16,154,247,840 | $13,714,637,354 | $13,022,481,028 | $13,017,340,554 | $14,358,937,139 | $12,904,811,638 | $13,714,657,034 | $12,312,303,574 |
The bulk of the tax expenditures come from a variety of carve-outs to the transaction privilege tax, Arizona’s version of a sales tax. In fiscal year 2016, nearly $12.3 billion was excluded from TPT collections, about half of which was due to services being exempted. Since fiscal year 2007, that figure is $110 billion. During that time, the state actually collected only $50 billion in TPT.
Tax carve-outs on individual income taxes, corporate income taxes and property taxes account for almost all of the rest of the tax expenditures.
Because of an amendment to the state constitution passed by Arizona voters in 1992, any change to the tax code that would result in an increase in revenue, such as removing a carve-out or reducing the expenditure it creates, would require approval by a two-thirds supermajority in each legislative chamber instead of a simple majority.
Sen. Steve Farley, a Tucson Democrat, and Sen. David Farnsworth, a Mesa Republican, introduced Senate Bill 1144 this year, which seeks to require a review of the hundreds of carve-outs, specifically to TPT, every ten years.
“One company buys a high-priced corporate lobbyist to come down, one time, in front of one committee, pass one bill, and they get a tax break into perpetuity,” Farley said of his proposal.
Farley offered recent examples, such as a law passed and signed by Gov. Doug Ducey in 2016, which exempts art gallery sales to out-of-state purchasers. The law is expected to cost $1.3 million each year in tax revenue. Another, which passed but was vetoed by Ducey this year, would have lessened sales tax for private airplane purchases. The bill was sponsored by Rep. Jill Norgaard, a Phoenix Republican, at the behest of Netjets Inc., which sells partial ownership of private jets. Legislative staff were unable to provide a concrete estimate for the cost of the proposed carve-out, but estimated that each plane it applied to would cost the state’s general fund between $470,000 and $2.2 million.
“So, we want to give special breaks to private jet owners and out-of-state art connoisseurs?” Farley asked.
In 2011 and 2012, lawmakers passed a major tax-cut plan that reduced several different corporate and capital gains taxes, phased in over several years. Advocates touted the reforms as needed to drive economic growth and create new jobs. However, legislative budget analysts say that, in the first three years, it the state has foregone $235.8 million in revenue because of those tax cuts.
2015/2016 TPT expenditures by deduction
CATEGORY | SUBCATEGORY | DEDUCTION | AMOUNT |
---|---|---|---|
PREFERENTIAL TAX RATE | NA | Nonmetalliferous Mining; Oil and Gas Production | $2,905,250 |
PREFERENTIAL TAX RATE | NA | Commercial lease | $436,677,986 |
CREDIT | NA | Accounting credit | $17,415,320 |
TPT EXEMPTION | PROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICES | Legal | $180,451,406 |
TPT EXEMPTION | PROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICES | Accounting, Tax Preparation, Bookkeeping and Payroll Services | $79,999,327 |
TPT EXEMPTION | PROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICES | Architectural and Engineering | $200,677,254 |
TPT EXEMPTION | PROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICES | Specialized Design Services | $12,560,292 |
TPT EXEMPTION | PROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICES | Computer System Design and Related Services | $277,600,097 |
TPT EXEMPTION | PROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICES | Management Consulting Services | $104,450,931 |
TPT EXEMPTION | PROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICES | Environmental Consulting Services | $9,465,021 |
TPT EXEMPTION | PROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICES | Other Scientific and Technical Consulting Services | $16,947,439 |
TPT EXEMPTION | PROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICES | Scientific Research and Development | $45,733,381 |
TPT EXEMPTION | PROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICES | Advertising, Public Relations and Technical Services | $40,247,509 |
TPT EXEMPTION | PROFESSIONAL, SCIENTIFIC AND TECHNICAL SERVICES | Other Professional, Scientific and Technical Services | $69,120,875 |
TPT EXEMPTION | HEALTH CARE SERVICES | Physicians | $437,876,426 |
TPT EXEMPTION | HEALTH CARE SERVICES | Dentists | $117,608,884 |
TPT EXEMPTION | HEALTH CARE SERVICES | Chiropractors | $13,175,017 |
TPT EXEMPTION | HEALTH CARE SERVICES | Optometrists | $10,935,950 |
TPT EXEMPTION | HEALTH CARE SERVICES | Mental Health Practitioners | $6,697,140 |
TPT EXEMPTION | HEALTH CARE SERVICES | Physical, Occupational and Speech Therapists | $23,211,029 |
TPT EXEMPTION | HEALTH CARE SERVICES | All Other Health Practitioners | $14,368,579 |
TPT EXEMPTION | HEALTH CARE SERVICES | Outpatient Care Centers | $117,911,042 |
TPT EXEMPTION | HEALTH CARE SERVICES | Medical and Diagnostic Labs | $56,374,511 |
TPT EXEMPTION | HEALTH CARE SERVICES | Home Health Services | $52,450,770 |
TPT EXEMPTION | HEALTH CARE SERVICES | Other Ambulatory Health Services | $91,293,427 |
TPT EXEMPTION | HEALTH CARE SERVICES | General Medical and Surgical Hospitals | $781,357,713 |
TPT EXEMPTION | HEALTH CARE SERVICES | Nursing Care Facilities | $60,644,906 |
TPT EXEMPTION | HEALTH CARE SERVICES | Residential Intellectual and Developmental Disability, Mental Health, and Substance Abuse Facilities | $32,705,894 |
TPT EXEMPTION | HEALTH CARE SERVICES | Continuing Care Retirement Facilities and Assisted Living Facilities | $55,604,624 |
TPT EXEMPTION | HEALTH CARE SERVICES | Other Residential Care Facilities | $6,365,668 |
TPT EXEMPTION | HEALTH CARE SERVICES | Individual and Family Services | $72,397,566 |
TPT EXEMPTION | HEALTH CARE SERVICES | Community Food and Housing, and Emergency and Other Relief Services | $32,397,252 |
TPT EXEMPTION | HEALTH CARE SERVICES | Child Day Care Services | $21,329,976 |
TPT EXEMPTION | ADMINISTRATIVE AND BUSINESS SUPPORT SERVICES | Office Administrative | $46,001,170 |
TPT EXEMPTION | ADMINISTRATIVE AND BUSINESS SUPPORT SERVICES | Facilities Support | $32,619,024 |
TPT EXEMPTION | ADMINISTRATIVE AND BUSINESS SUPPORT SERVICES | Employment Services | $220,912,196 |
TPT EXEMPTION | ADMINISTRATIVE AND BUSINESS SUPPORT SERVICES | Business Support | $82,185,384 |
TPT EXEMPTION | ADMINISTRATIVE AND BUSINESS SUPPORT SERVICES | Travel Arrangement and Reservation | $68,487,597 |
TPT EXEMPTION | ADMINISTRATIVE AND BUSINESS SUPPORT SERVICES | Investigation and Security | $52,786,908 |
TPT EXEMPTION | ADMINISTRATIVE AND BUSINESS SUPPORT SERVICES | Services to Building and Dwellings | $121,619,413 |
TPT EXEMPTION | ADMINISTRATIVE AND BUSINESS SUPPORT SERVICES | Other Support Services | $33,270,226 |
TPT EXEMPTION | ADMINISTRATIVE AND BUSINESS SUPPORT SERVICES | Waste Collection | $38,181,775 |
TPT EXEMPTION | ADMINISTRATIVE AND BUSINESS SUPPORT SERVICES | Waste Treatment and Disposal | $9,203,513 |
TPT EXEMPTION | ADMINISTRATIVE AND BUSINESS SUPPORT SERVICES | Remediation and other waste management services | $14,999,390 |
TPT EXEMPTION | PERSONAL CARE SERVICES | Barber | $542,508 |
TPT EXEMPTION | PERSONAL CARE SERVICES | Beauty Salons | $18,170,698 |
TPT EXEMPTION | PERSONAL CARE SERVICES | Nail Salons | $3,108,179 |
TPT EXEMPTION | PERSONAL CARE SERVICES | Diet and Weight Reducing Centers | $2,281,910 |
TPT EXEMPTION | PERSONAL CARE SERVICES | Other Personal Care | $5,252,930 |
TPT EXEMPTION | PERSONAL CARE SERVICES | Death Care Services | $9,034,212 |
TPT EXEMPTION | PERSONAL CARE SERVICES | Personal and Laundry Services | $22,401,602 |
TPT EXEMPTION | PERSONAL CARE SERVICES | Pet Care (not Veterinary) | $3,404,201 |
TPT EXEMPTION | PERSONAL CARE SERVICES | Photofinishing | $823,339 |
TPT EXEMPTION | PERSONAL CARE SERVICES | Parking lot/Garages | $10,720,769 |
TPT EXEMPTION | PERSONAL CARE SERVICES | Other Personal Services | $3,930,433 |
TPT EXEMPTION | EDUCATIONAL SERVICES | Business School/Computer/Management Training | $9,422,902 |
TPT EXEMPTION | EDUCATIONAL SERVICES | Technical and Trade Schools | $31,925,365 |
TPT EXEMPTION | EDUCATIONAL SERVICES | Other Schools and Instruction | $14,823,135 |
TPT EXEMPTION | EDUCATIONAL SERVICES | Education Support Services | $9,492,997 |
TPT EXEMPTION | FINANCIAL SERVICES | Credit Unions | $41,655,186 |
TPT EXEMPTION | FINANCIAL SERVICES | Sales Financing | $90,469,588 |
TPT EXEMPTION | FINANCIAL SERVICES | Mortgage and Nonmortgage Loan Brokers | $9,392,155 |
TPT EXEMPTION | FINANCIAL SERVICES | Financial Transaction Processing and Clearing | $62,544,339 |
TPT EXEMPTION | FINANCIAL SERVICES | Other Activities Related to Credit Intermediation | $13,514,042 |
TPT EXEMPTION | FINANCIAL SERVICES | Securities Brokerage | $111,563,402 |
TPT EXEMPTION | FINANCIAL SERVICES | Portfolio Management | $45,264,359 |
TPT EXEMPTION | FINANCIAL SERVICES | Investment Advice | $33,966,768 |
TPT EXEMPTION | FINANCIAL SERVICES | Other Financial Investment Activities | $483,195,896 |
TPT EXEMPTION | OTHER SERVICES | Automotive Repair and Maintenance | $102,321,964 |
TPT EXEMPTION | OTHER SERVICES | Electronic and Precision Repair and Maintenance | $13,195,560 |
TPT EXEMPTION | OTHER SERVICES | Commercial, Industrial Machinery Repair and Maintenance | $26,825,008 |
TPT EXEMPTION | OTHER SERVICES | Personal and Household Goods Repair and Maintenance | $5,475,760 |
TPT EXEMPTION | OTHER SERVICES | Religious, Grantmaking, Civic, Professional and similar Organizations | $110,617,911 |
TPT EXEMPTION | ALL OTHER | Wholesale trade (503) | $4,022,858,923 |
TPT EXEMPTION | ALL OTHER | Cash discounts (708) | $5,484,353 |
TPT EXEMPTION | ALL OTHER | Trade-ins (711) | $9,023,345 |
TPT EXEMPTION | ALL OTHER | Services provided by a retailer (549) | $214,546,830 |
TPT EXEMPTION | ALL OTHER | Business activity on a Reservation for a Enrolled Native American or Tribal entity (570) | $12,119,288 |
TPT EXEMPTION | ALL OTHER | Sale of postage stamps at face value (716) | N/A |
TPT EXEMPTION | ALL OTHER | Sales to Foreign diplomats (777) | N/A |
TPT EXEMPTION | ALL OTHER | Sale of warranty or service contracts (542) | $19,090,296 |
TPT EXEMPTION | ALL OTHER | Sale of tangible personal property by a nonprofit organization (725) | $708,350 |
TPT EXEMPTION | ALL OTHER | Sale of an aircraft sold to a carrier, government or nonresident (507) | $331,940 |
TPT EXEMPTION | ALL OTHER | Sale of stocks and bonds (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | Prescription drugs and medical oxygen (536) | $603,979,601 |
TPT EXEMPTION | ALL OTHER | Prosthetic appliances (559) | $14,649,744 |
TPT EXEMPTION | ALL OTHER | Insulin, insulin syringe and glucose test strips (533) | $64,657 |
TPT EXEMPTION | ALL OTHER | Prescription eyeglasses and contact lenses (590) | $1,905,212 |
TPT EXEMPTION | ALL OTHER | Hearing aids (594) | $553,262 |
TPT EXEMPTION | ALL OTHER | Durable medical equipment (526) | $21,100,163 |
TPT EXEMPTION | ALL OTHER | Sales to nonresidents for use outside Arizona if the property is shipped or delivered outside the state (541) | $5,611,739 |
TPT EXEMPTION | ALL OTHER | Food for home consumption (506 and 513) | $356,404,061 |
TPT EXEMPTION | ALL OTHER | Textbooks that are required by any state university or community college (505) | $975,597 |
TPT EXEMPTION | ALL OTHER | Meals provided to Employee of restaurants (568) | $135,437 |
TPT EXEMPTION | ALL OTHER | Food used in school lunches (569) | $1,725,879 |
TPT EXEMPTION | ALL OTHER | Sale of Arizona lottery tickets (521) | $43,545,000 |
TPT EXEMPTION | ALL OTHER | Precious metal bullion and monetized bullion (567 and 601) | $2,940,132 |
TPT EXEMPTION | ALL OTHER | Sales of vehicle fuel and aviation fuel (515) | $161,824,860 |
TPT EXEMPTION | ALL OTHER | Tangible personal property sold to Personal property leasing business to lease (571) | $708,238 |
TPT EXEMPTION | ALL OTHER | Tangible personal property sold in interstate or foreign commerce (504) | $247,270,220 |
TPT EXEMPTION | ALL OTHER | Tangible personal property sold to a qualifying hospital or a qualifying health care organization or sold to or purchased by qualifying community health centers and health care organizations (545, 546, 572, 574) | $41,929,665 |
TPT EXEMPTION | ALL OTHER | Tangible personal property sold to a nonprofit organization which regularly serves meals to the needy and indigent (544) | $2,321,744 |
TPT EXEMPTION | ALL OTHER | Tangible personal property sold to a nonprofit organization which provides housing for low-income persons over 62 years of age (573) | N/A |
TPT EXEMPTION | ALL OTHER | Tangible personal property sold to Qualifying Health Sciences Educational Institution (699) | N/A |
TPT EXEMPTION | ALL OTHER | Magazines or other periodicals or publications to encourage tourist travel (602) | N/A |
TPT EXEMPTION | ALL OTHER | Sale of articles to a contractor for incorporation or fabrication under a contract or for environmental response or remediation (552 and 589) | $7,025,251 |
TPT EXEMPTION | ALL OTHER | Tangible personal property sold to a Subcontractor for incorporation into a Prime Contracting project (584) | $484,851 |
TPT EXEMPTION | ALL OTHER | Exempt motor vehicle sales for certain nonresidents (580) | $250,556 |
TPT EXEMPTION | ALL OTHER | Exempt motor vehicle sales for Native Americans (530) | $2,252,511 |
TPT EXEMPTION | ALL OTHER | Tangible personal property purchased by a nonprofit charitable organization that uses such property for training, etc., for mentally or physically handicapped persons (575) | N/A |
TPT EXEMPTION | ALL OTHER | Tangible personal property sold by a nonprofit organization associated with a major league baseball team or a national touring professional golf association (762) | N/A |
TPT EXEMPTION | ALL OTHER | Tangible personal property sold by a nonprofit organization associated with a rodeo featuring primarily farm and ranch animals (763) | N/A |
TPT EXEMPTION | ALL OTHER | Sales of commodities under futures contracts consigned to a warehouse for resale (583) | $449,724 |
TPT EXEMPTION | ALL OTHER | Seeds, seedlings, etc., to commercially produce agricultural, horticultural, viticultural or floricultural crops in Arizona (537) | $1,852,887 |
TPT EXEMPTION | ALL OTHER | Machinery, equipment and certain supplies used to assist the physically or developmentally disabled or those persons with head injuries (525) | $1,776,699 |
TPT EXEMPTION | ALL OTHER | Sales of natural gas or liquefied petroleum gas used to propel a vehicle (509) | $8,982,419 |
TPT EXEMPTION | ALL OTHER | Paper machine clothing used or consumed in paper manufacturing (586) | N/A |
TPT EXEMPTION | ALL OTHER | Machinery, equipment, utility product, materials and other tangible personal property used to construct a qualified environmental technology facilityåÊåÊåÊ(607) | N/A |
TPT EXEMPTION | ALL OTHER | Sales of coal, petroleum, coke, natural gas, virgin fuel oil and electricity to an environmental technology facility (511) | $290,595 |
TPT EXEMPTION | ALL OTHER | Sales of liquid, solid or gaseous chemicals used in manufacturing, processing, fabricating, mining, refining, metallurgical operations or research or development (510) | $9,033,403 |
TPT EXEMPTION | ALL OTHER | Sales of food or drink consumed on the premises of a jail or prison (514) | $706,492 |
TPT EXEMPTION | ALL OTHER | Motor vehicles and any tangible personal property or repair that becomes a part of the motor vehicles sold to a licensed motor operator that lease or rent the property (528) | $3,171,834 |
TPT EXEMPTION | ALL OTHER | Livestock, poultry feed, salts, vitamins for livestock or poultry consumption (520) | $4,953,224 |
TPT EXEMPTION | ALL OTHER | Sale or purchase of implants used as growth promotants and injectable medicine (516) | $273,828 |
TPT EXEMPTION | ALL OTHER | Sales of motor vehicles at auction to nonresidents of Arizona for use outside Arizona (529) | $3,242,085 |
TPT EXEMPTION | ALL OTHER | Personal hygiene products which are furnished to and to be consumed by hotel occupants (534 and 566) | $214,254 |
TPT EXEMPTION | ALL OTHER | Sales or purchases of alternative fuel to a used oil fuel burner (587) | N/A |
TPT EXEMPTION | ALL OTHER | Printed, photographic, electronic or digital media materials for use in publicly funded libraries (519) | $227,892 |
TPT EXEMPTION | ALL OTHER | Tangible personal property consisting of food, beverages and condiments sold to or purchase by a commercial airline (512) | $637,134 |
TPT EXEMPTION | ALL OTHER | Sale of new alternative fuel vehicles and conversion equipment (592) | N/A |
TPT EXEMPTION | ALL OTHER | Sale of spirituous, vinous or malt liquor by a liquor wholesaler (588) | N/A |
TPT EXEMPTION | ALL OTHER | Tangible personal property by a nonprofit that produces, organizes or promotes cultural or civic related festivals (764) | $46,359 |
TPT EXEMPTION | ALL OTHER | Application services designed to assess or test student learning (596) | $68,058 |
TPT EXEMPTION | ALL OTHER | Sale of motor vehicle fuel and use fuel to a Healthy Forest business (598) | N/A |
TPT EXEMPTION | ALL OTHER | Sale of repair parts in equipment used by a Healthy Forest business (603) | $107,548 |
TPT EXEMPTION | ALL OTHER | Sales or transfer of renewable energy credits (604) | $94,830 |
TPT EXEMPTION | ALL OTHER | Sales of computer data equipment for use in a certified computer data center (565) | $110,527 |
TPT EXEMPTION | ALL OTHER | Sales of orthodontic devices dispensed by a dental professional (582) | N/A |
TPT EXEMPTION | ALL OTHER | Property sold to a Contractor for a MRRA project on an Indian Reservation (712) | $132,548 |
TPT EXEMPTION | ALL OTHER | Machinery or equipment used directly in manufacturing, processing, fabricating, job printing, refining or metallurgical operations (522) | $30,752,467 |
TPT EXEMPTION | ALL OTHER | Sale of machinery or equipment used in mining and in drilling for or extracting oil or gas from the earth (523 and 579) | $16,358,238 |
TPT EXEMPTION | ALL OTHER | Certain equipment used in the telecommunications industry (539) | $1,421,457 |
TPT EXEMPTION | ALL OTHER | Machinery, equipment or transmission lines used directly in producing or transmitting electrical power (524) | $6,438,820 |
TPT EXEMPTION | ALL OTHER | Neat animals, horses, asses, sheep, swine or goats used or to be used as breeding or production stock (605) | $106,339 |
TPT EXEMPTION | ALL OTHER | Pipes or valves 4Û in diameter used to transport oil, natural gas, artificial gas, water or coal slurry (535) | $746,022 |
TPT EXEMPTION | ALL OTHER | Certain aircraft, navigational and communication instruments (508) | $9,045,906 |
TPT EXEMPTION | ALL OTHER | Machinery, tools, equipment used in repairing, remodeling or maintaining aircraft, aircraft engines or aircraft component parts (532) | $481,446 |
TPT EXEMPTION | ALL OTHER | Railroad rolling stock, rails, ties and signal control equipment used to transport persons or property for hire (576) | $104,967 |
TPT EXEMPTION | ALL OTHER | Buses or other urban mass transit vehicles used to transport persons for hire or pursuant to a governmentally adopted and controlled urban mass transportation program (606) | N/A |
TPT EXEMPTION | ALL OTHER | Certain groundwater measuring devices and their installation (581) | N/A |
TPT EXEMPTION | ALL OTHER | New machinery and equipment used for commercial production of agricultural, horticultural, viticultural and floricultural crops (585) | $3,476,564 |
TPT EXEMPTION | ALL OTHER | Machinery or equipment used in research and development (553) | $913,561 |
TPT EXEMPTION | ALL OTHER | Tangible personal property used by an direct broadcast satellite television or data transmission service or facility (591) | N/A |
TPT EXEMPTION | ALL OTHER | Clean rooms used for manufacturing, processing, fabrication or research and development (595) | $110,527 |
TPT EXEMPTION | ALL OTHER | Machinery or equipment for poultry and egg production (577) | N/A |
TPT EXEMPTION | ALL OTHER | Machinery and equipment used by agriculture to prevent, monitor, control or reduce pollution (597) | N/A |
TPT EXEMPTION | ALL OTHER | Machinery and equipment to prevent pollution for farming and ranching (599) | N/A |
TPT EXEMPTION | ALL OTHER | Digital television machinery and equipment purchases for compliance with the Telecommunications Act of 1996 (578) | N/A |
TPT EXEMPTION | ALL OTHER | Machinery and equipment sold or rented to a healthy forest certified business (554) | $49,362 |
TPT EXEMPTION | ALL OTHER | Federal luxury excise tax on heaving trucks and trailers (609) | N/A |
TPT EXEMPTION | ALL OTHER | Sales made to the U S Government by a manufacturer, modifier, assembler or repairer (547) | $31,451,080 |
TPT EXEMPTION | ALL OTHER | Sales of component parts made to a manufacturer, modifier, assembler or repairer for sale to the U S Government (543) | $5,371,050 |
TPT EXEMPTION | ALL OTHER | Sales of overhead materials used in a contract between the U S Government and a manufacturer, modifier, assembler or repairer (611) | $1,101,000 |
TPT EXEMPTION | ALL OTHER | 50% of retail sales made to U S Government; 100% of Use Tax (548) | $4,152,600 |
TPT EXEMPTION | ALL OTHER | Gross income from motor vehicle manufacturerÛªs cash rebates if assigned to the retailer (501) | $21,677,536 |
TPT EXEMPTION | ALL OTHER | Gross income derived from the waste tire disposal fee (613) | N/A |
TPT EXEMPTION | ALL OTHER | Sales of solar energy devices (538) | $26,026,180 |
TPT EXEMPTION | ALL OTHER | Sales of wireless telecommunication equipment as an inducement to enter into or continue a contract for telecommunication services or sales commissions received (614) | $65,156 |
TPT EXEMPTION | ALL OTHER | Sales of motor vehicle to a nonresident from a state with a lower tax rate (531) | $2,529,091 |
TPT EXEMPTION | ALL OTHER | Transportation by vehicles subject to fees paid to MVD (715) | $365,954 |
TPT EXEMPTION | ALL OTHER | Transportation of persons by air if taxation is prohibited by Federal Law (615) | $1,877,324 |
TPT EXEMPTION | ALL OTHER | Ambulances or ambulance services (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | Public transportation services for dialÛaÛride programs and special needs transportation services (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | Gross proceeds for transporting freight or property by an exclusively Arizona railroad for portions of single shipments involving other railroads (616) | $414,421 |
TPT EXEMPTION | ALL OTHER | Gross proceeds for arranging transportation as a convenience or service to a customer if the business is not engaged in the transportation business (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | Gross proceeds of sales or gross income derived from transporting for hire persons, freight or property by a railroad pursuant to a contract with another railroad (620) | $44,386 |
TPT EXEMPTION | ALL OTHER | Sales taxed under another business code (640) | $167,152 |
TPT EXEMPTION | ALL OTHER | Sales of transportation or amusement activities arranged by another business that is exempt (612) | $230,301 |
TPT EXEMPTION | ALL OTHER | Sales of transportation or amusement activities arranged and taxed by another (702) | $158,247 |
TPT EXEMPTION | ALL OTHER | Gross proceeds of sales or gross income derived from transporting fertilizer by a railroad from a point in Arizona to another point in Arizona (625) | N/A |
TPT EXEMPTION | ALL OTHER | Sales of electric services to a retail electric customer who is located outside Arizona for Delivery and use outside Arizona (617) | N/A |
TPT EXEMPTION | ALL OTHER | Rental of space on utility poles (759) | N/A |
TPT EXEMPTION | ALL OTHER | Sales from transfer of electricity by a retail electric customer to an electric distribution system (618) | N/A |
TPT EXEMPTION | ALL OTHER | Development fees charged by a municipally owned utility (621) | $956,377 |
TPT EXEMPTION | ALL OTHER | Revenue received by any person owning a utility system in the form of reimbursement or compensation for property and equipment installed to provide utility access to, on or across land of any actual utility consumer (626) | N/A |
TPT EXEMPTION | ALL OTHER | Interstate sales of electricity, natural gas and water | N/A |
TPT EXEMPTION | ALL OTHER | Interstate telecommunications services (643) | $1,693,959 |
TPT EXEMPTION | ALL OTHER | Sales of intrastate telecommunications services by a cable television system or by a microwave television transmission system (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | Sales of internet access services (517) | $1,253,745 |
TPT EXEMPTION | ALL OTHER | Sales of intrastate telecommunications services to a direct broadcast satellite television or data transmission service (619) | N/A |
TPT EXEMPTION | ALL OTHER | EndÛuser common line charges and carrier access charges established by federal communications regulations (641 and 627) | N/A |
TPT EXEMPTION | ALL OTHER | Sales of direct broadcast satellite television services (633) | $65,306 |
TPT EXEMPTION | ALL OTHER | Telecommunications services purchased with a prepaid calling card (649) | N/A |
TPT EXEMPTION | ALL OTHER | Manufacturing or publishing books (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | Gross income of publications derived from advertising (628) | Included in services |
TPT EXEMPTION | ALL OTHER | Sales to a person distributing printing, engraving, embossing or copying without consideration in connection with the publication of a newspaper or magazine (630) | N/A |
TPT EXEMPTION | ALL OTHER | Sales of job printing, engraving, embossing and copying for use outside Arizona if the materials are shipped or delivered out of the state (637) | $679,114 |
TPT EXEMPTION | ALL OTHER | Sales of postage and freight (561) | $1,339,159 |
TPT EXEMPTION | ALL OTHER | Leasing a mobile home for more than 29 days (629) | $1,382,391 |
TPT EXEMPTION | ALL OTHER | Leasing or renting 4 or fewer rooms of an ownerÛoccupied residence bed and breakfast with less than 50% average annual occupancy (636) | N/A |
TPT EXEMPTION | ALL OTHER | Transient lodging sales or activities that are exempt (704) | $1,658,634 |
TPT EXEMPTION | ALL OTHER | Transient lodging sales or activities that are exempt under the Amusement or Transporting classifications (701) | N/A |
TPT EXEMPTION | ALL OTHER | Commissions paid in the Transient Lodging classification (648) | N/A |
TPT EXEMPTION | ALL OTHER | Transient lodging sales for lodging for more than thirty days (718) | $606,331 |
TPT EXEMPTION | ALL OTHER | Leasing films, tapes or slides used by theaters or movies or used by television stations or radio stations (784) | N/A |
TPT EXEMPTION | ALL OTHER | Amusement activities sponsored by the Arizona exposition and state fair board (785) | N/A |
TPT EXEMPTION | ALL OTHER | Lease of tangible personal property by a parent to a subsidiary or by a subsidiary to another subsidiary (631) | $685,999 |
TPT EXEMPTION | ALL OTHER | Operating coinÛoperated washing, drying and dry cleaning machines or car washing machines (786) | N/A |
TPT EXEMPTION | ALL OTHER | Leasing or renting aircraft or training equipment by a nonprofit school offering aviation and aerospace degrees (787) | N/A |
TPT EXEMPTION | ALL OTHER | Leasing or renting photographs, transparencies, etc. used by Arizona on the internet, in magazines or other publications encouraging tourism (651) | N/A |
TPT EXEMPTION | ALL OTHER | Leasing or renting certified ignition interlock devices (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | Vehicle registration fee reimbursements (656) | $53,622 |
TPT EXEMPTION | ALL OTHER | Leasing or renting a motor vehicle if the motor carrier fee has been paid (660) | $1,998,224 |
TPT EXEMPTION | ALL OTHER | Amounts received by a motor vehicle dealer for the 1stmonth of a lease payment if the lease is transferred to a third party (556) | $185,948 |
TPT EXEMPTION | ALL OTHER | Car rental surcharge charges (680) | N/A |
TPT EXEMPTION | ALL OTHER | Freight charges relating to nonmetalliferous mineral products (652) | N/A |
TPT EXEMPTION | ALL OTHER | Process cost on nonmetalliferous mineral products shipped out of state (658) | $775,320 |
TPT EXEMPTION | ALL OTHER | Private or group instructional activities (657) | $434,674 |
TPT EXEMPTION | ALL OTHER | Monthly membership fees (527) | $2,095,566 |
TPT EXEMPTION | ALL OTHER | Musical, dramatic or dance groups or a botanical garden, museum or zoo that qualifies as a nonprofit charitable organization (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | Sales of admissions to intercollegiate football contests (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | Fees and assessments received by a homeowners organization (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | Arranging an amusement activity as a service to a personÛªs customers (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | PariÛmutuel and purse monies (661) | $669,547 |
TPT EXEMPTION | ALL OTHER | Transient Lodging recreational establishment membership fees (666) | $300,677 |
TPT EXEMPTION | ALL OTHER | Sale to transient lodging business for resale (670) | $62,360 |
TPT EXEMPTION | ALL OTHER | Gratuities distributed to servers or service employees (724) | N/A |
TPT EXEMPTION | ALL OTHER | Sales by CongressionallyÛchartered veterans organization of food or drink (744) | $95,055 |
TPT EXEMPTION | ALL OTHER | Sales by churches, fraternal benefit societies and other nonprofit organizations which donÛªt regularly engage or continue in the restaurant business for the purpose of fund raising (no deduction code) | N/A |
TPT EXEMPTION | ALL OTHER | Restaurant sales to a school district (662) | N/A |
TPT EXEMPTION | ALL OTHER | Prime Contracting income from out of state projects (681) | $9,873,858 |
TPT EXEMPTION | ALL OTHER | Sale of used manufactured buildings (562) | $238,426 |
TPT EXEMPTION | ALL OTHER | Sale for resale to another manufactured building dealer (668) | N/A |
TPT EXEMPTION | ALL OTHER | 35% Deduction from Prime Contracting Base (502) | $135,996,969 |
TPT EXEMPTION | ALL OTHER | Purchase by a Prime Contractor of machinery, equipment or other tangible personal property by a that is exempt under another classification (608, 622, 623, 624, 632, 635, 639, 644, 645, 646, 654, 665, 674, 675, 685, 691, 697, 706, 799) | $4,475,246 |
TPT EXEMPTION | ALL OTHER | Land Deduction (518) | $11,041,406 |
TPT EXEMPTION | ALL OTHER | Furniture and Appliances not incorporated into a Manufactured building (663) | N/A |
TPT EXEMPTION | ALL OTHER | Contracting in a military reuse zone for a manufacturer, assembler or fabricator of aviation or aerospace products (667) | N/A |
TPT EXEMPTION | ALL OTHER | Gross proceeds of sales from a contract to install, assemble, repair or maintain machinery that does not become permanently attached (600) | $3,314,631 |
TPT EXEMPTION | ALL OTHER | Income from contracts for construction of facilities for raising egg producing poultry or the production and packaging of eggs (683) | $528,518 |
TPT EXEMPTION | ALL OTHER | Income from contracts for construction of a launch site (698) | N/A |
TPT EXEMPTION | ALL OTHER | Income from contracts for construction of a domestic violence shelter (673) | N/A |
TPT EXEMPTION | ALL OTHER | Gross proceeds from contracts to perform postÛconstruction treatment of real property for termite and general pest control (686) | $451,048 |
TPT EXEMPTION | ALL OTHER | Gross proceeds from contracts to certain state university research infrastructure projects (696) | N/A |
TPT EXEMPTION | ALL OTHER | Gross proceeds from construction contracts for healthy forest business (555) | $472,766 |
TPT EXEMPTION | ALL OTHER | Gross proceeds from development or impact fees (560) | $527,681 |
TPT EXEMPTION | ALL OTHER | Gross proceeds from construction of a mixed waste processing facility located on a municipal solid waste landfill (719) | N/A |
TPT EXEMPTION | ALL OTHER | Subcontracting income (550) | $295,367,011 |
TPT EXEMPTION | ALL OTHER | Lawn maintenance services (689) | $967,894 |
TPT EXEMPTION | ALL OTHER | Cost of architectural or engineering service (557) | $2,738,282 |
TPT EXEMPTION | ALL OTHER | Manufactured building delivered out of state (694) | N/A |
TPT EXEMPTION | ALL OTHER | Construction Design phase or professional services (690) | $992,689 |
TPT EXEMPTION | ALL OTHER | Maintenance, repair, replace or alteration contract with a property owner (500) | $118,489,839 |
TPT EXEMPTION | ALL OTHER | Credit for tax paid to an equivalent jurisdiction (684) | $672,201 |
TPT EXEMPTION | ALL OTHER | Component parts for a manufactured product for resale (687) | $3,112,452 |
TPT EXEMPTION | ALL OTHER | Tangible personal property not exceeding $200 purchased by an individual at retail outside the continental U.S. ÛÒ USE TAX ONLY (693) | N/A |
TPT EXEMPTION | ALL OTHER | Advertising Supplements (688) | N/A |
TPT EXEMPTION | ALL OTHER | Tangible personal property purchased by a nonprofit charitable organization from the parent or affiliate organization located out of state ÛÒ USE TAX ONLY (695) | $72,864 |
TPT EXEMPTION | ALL OTHER | Motor vehicles removed from inventory and provided to charitable or educational institutions or state universities or their affiliated organization ÛÒ USE TAX ONLY (703) | $190,726 |
TPT EXEMPTION | ALL OTHER | Tangible personal property which directly enters into or becomes an ingredient or part of cards used as prescription plan identification cards ÛÒ USE TAX ONLY (705) | N/A |
TPT EXEMPTION | ALL OTHER | Liquefied natural gas used to fuel compressor equipment ÛÒ USE TAX ONLY (563) | $57,082 |
TPT EXEMPTION | ALL OTHER | Tangible personal property exempt under the Utility classification (707) | $855,664 |
TPT EXEMPTION | ALL OTHER | Purchase price of electricity bought by a retail electric customer from a utility when tax is paid under utility classification (709) | N/A |
TPT EXEMPTION | ALL OTHER | Purchase price of electricity or natural gas by a manufacturer or smelting operations (710) | $2,656,924 |
TPT EXEMPTION | ALL OTHER | Purchase price of electricity or natural gas by a business that operates an international operations center that is certified by the Arizona Commerce Authority (783) | N/A |
TPT EXEMPTION | ALL OTHER | Sales to Direct Pay permit holder (692) | $144,563 |
TPT EXEMPTION | ALL OTHER | 3% of tax collected for 911 tax on prepaid wireless products (564) | $254,264 |
Farley contrasted the value of those cuts with what he estimated is a roughly $100 million price tag for restoring Arizona’s cash assistance program for needy families to a two-year lifetime cap, instead of the reduced one-year cap passed in 2016. Reducing the amount of time allowed for anyone receiving the assistance was intended to save $3.8 million, but actually cost the state about $9 million because of federal matching requirements that were no longer met.
“If we weren’t giving away so much in tax exemptions, we could have a lower sales tax rate and have more revenues go to things we want to pay for,” Farley told the House Ways and Means Committee in March. “Or, in some cases, I’ve heard from friends of mine on the other side of the aisle saying we would have enough money to lower the state income tax or get rid of it entirely, if we took away enough of these exemptions.”
Rep. Vince Leach, R-Tucson, opposed SB 1144 and took particular issue with referring to the review committee established by the bill as a the Joint Legislative Tax Expenditure Review Committee, because the name would include the word “expenditure.” Leach said during the committee hearing that name would give the impression that the Legislature is making an appropriation toward each different carve-out, rather than never collecting it.
“I have concerns about telling people that we are spending $12.1B (from TPT) on that,” Leach said.
Arizona law defines tax expenditures as “any tax provision in state law which exempts, in whole or in part, any persons, income, goods, services or property from the impact of established taxes,” including things like exclusions, exemptions, credits and deductions. The Department of Revenue is required to write a report for the governor and Legislature each year detailing “the approximate costs in lost revenue” from all tax expenditures.
House Ways and Means Committee Chairwoman Michelle Ugenti-Rita, R-Scottsdale, said she has repeatedly been surprised to see new tax carve-outs being scheduled for consideration.
“Every time I’m in my agenda setting meetings, I’m shocked to find out about another break or some kind of carve-out (being proposed),” she said during the March 15 committee hearing on SB 1144. “It’s very difficult to make a decision when you don’t understand, or you don’t have the bigger, broader picture and the scope. You need that context so that, when you are considering something, you can fit it into a larger picture. I like the bill.”
The bill was approved by House Ways and Means, but is awaiting a constitutional check by the House Rules Committee before it can be considered by the full House. With the legislative session likely to end in the next week, the fate of SB 1144 is unclear.
After learning about SB 1144, Rep. Paul Boyer, R-Glendale, said he researched examples of states moving to recover carve-outs, and found an instructive example in Florida from the 1980s.
In 1987, Florida lawmakers adjusted how the state determined whether certain services were taxable – in particular, regarding in-state and out-of-state transactions – and the state expected it to produce $1.2 billion in revenue from the change. But after the bill was passed and signed, the business community protested and public opinion polls showed a shift toward opposing the tax, and the plan was repealed after six months.