AZ Needs Real Fiscal Responsibility

The AZ Republic recently reportedly on the reduction in state revenue caused by the Legislature cutting the budget of the AZ Department of Revenue (DOR). I’ve previously talked and written about this penny wise, pound foolish move, and this article just reinforced my assessment.

In spite of warnings from experts, state budget cuts forced layoffs of AZ DOR auditors responsible for corporate auditing resulting in a $75 million fall in revenue from 2016 to 2017.

In October of 2016, the DCourier reported AZ DOR’s reduction of auditors from 30 to 4. “There basically is no longer any corporate activity at the Department of Revenue,” said Georganna Meyer, the agency’s former chief economist, “That’s going to have a significant impact on any enforcement revenues we’ve seen in the past.” Governor Ducey’s spokesman brushed aside the sharp drop in the number of corporate auditors saying state revenues and tax collections were up. An AZ DOR spokesman backed up the claim, but said the impact of the 50-employee layoff had not yet been felt.

This isn’t nearly enough said Meyer. “Corporate auditing is hard and companies will cheat if they can get away with it.” With more than 50,000 corporations in the state, the oversight job is huge, but just the threat of an audit helps honest companies stay that way.

Even without cheating, corporations are making out like bandits in Arizona. In 2013, they were “paying” a tax rate of close to 7 percent, in 2017 it was 4.9 percent.

Arizona’s entire annual budget is just over $9B, but our Legislature gives away over $13B in corporate tax breaks each year while our K–12 schools lag the national average for funding by almost $4B. The dogmatic determination to pursue repeatedly wrong-proven trickle-down tax breaks is a race to the bottom that will not end well (ask Kansas).

Republicans know tax cuts sell, so they tout State tax reductions to get voters on their side.  But it’s a bait-and-switch strategy.  Counties, cities, and school districts get stuck asking for local tax increases (sales and property) to protect investments in education and infrastructure.  For residents and small businesses, it’s still a tax increase, but poorer, rural areas will be less and less able to shoulder them, and we’ll continue to segregate our communities into the “have’s” and “have nots.”  That’s not a winning State strategy.

We’re on a downward spiral that can be fixed with some simple, well-placed policy changes.  We need legislators who are serious about building a positive future where both business and our citizens can thrive. We need legislators willing to exercise real fiscal responsibility by saying “NO” to those corporate giveaways that don’t produce a return on investment for our state and its citizens.

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We Need Fiscal Responsibility Now

While I applaud Jim Swanson’s call to the business community “to lead” in securing additional funding for Arizona’s K–12 educational system, I believe his solution of a 1.5 cent per dollar sales tax is a less than ideal way to raise those funds.

In Arizona, one in four children lives in poverty and there is vast evidence that poverty is the number one out-of-school determinant in predicting student success. Increasing the sales tax, the most regressive of all taxes, will hurt these students and their families most, just adding to the problem. Also, sales tax is not the most stable of funding sources, because families that can’t afford the increase stop purchasing taxed goods.  Still, I’m in total agreement with Mr. Swanson that stable funding is something our schools desperately need.

Yes, with our teachers the lowest paid in the Nation, and per pupil funding at 48th, additional revenue is needed for K–12 education. But, ensuring everyone, including corporations, pay their fair share can go a long way toward meeting the need. Currently, our state tax laws do not promote that ideal. In fact, two-thirds to three-fourths of Arizona Corporations that file state income tax pay almost no state income tax (the $50 minimum) each year. The result is that corporate income tax collections in Arizona, once $986 million in 2007, were $663 million in 2015, and are projected, with additional scheduled cuts, to be only $298 million by 2019. As for the promise that lower corporate taxes create jobs, that’s a race to the bottom, pitting state against state when we need to be thinking as globally as those corporations are. Kansas anyone?

Truth is, corporate tax cuts may sound good, but tend to be only a short-term fix to creating a business-friendly climate. We don’t need more low-paying jobs that keep hard-working people in poverty. We need quality companies that are good neighbors and provide well-paying jobs. These companies know that chasing after the lowest corporate taxes doesn’t support their long-term growth. What they want and need, to truly thrive over the long haul, is a modern, well-maintained infrastructure and a well-educated workforce.

Arizona lawmakers need to quit talking about fiscal responsibility and actually do something about it. Cutting Arizona’s Department of Revenue budget by $7 million in 2016, resulting in a decrease in corporate auditors from 30 to 4 is not an example of fiscal responsibility. A former DOR official puts the potential lost revenue at $100 million per year. Instead, our lawmakers should be stepping up enforcement efforts of the laws we have on the books and reviewing them to ensure they provide a return on investment. Some people are calling for a bipartisan committee to review hundreds of corporate tax loopholes currently on the books. Estimates are that a scrub of those could generate up to $2 billion in revenue per year.

Arizonans can have our cake and eat it too, but we must work together to find the best solutions that work for all of us. That requires an understanding that compromise is key and that we can achieve amazing results if we don’t care who gets the credit. Ultimately, it requires real leadership.

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What we have here is a lack of leadership

As a second lieutenant in the Air Force, I quickly learned the basic tenets of real leadership. During that 26-year career, as in other ventures, they served me well. They aren’t complicated or hard to learn, but as is often the case with doing the right thing, they aren’t always easy to do.

I understand many people voted for our president because they were tired of the status quo and wanted someone who would “drain the swamp.” Some just couldn’t stomach the alternative. I also recognize that many believed he represented their values and endorsed him with their votes.

Winning a leadership role doesn’t automatically make one a leader. Rather, it is by character and practice that a leader develops. And, it is by adherence to those basic tenets that the leader hones his or her skills.

Effective leaders model the behavior they want from others. How best to get the point across is something good parents learn quickly. It doesn’t take long to realize that setting the right example is more important than saying the right words. Effective leaders don’t preach “America First” while buying raw materials from the cheapest source in the world and having their products manufactured in other countries. That’s “globalization,” not America First.

Real leadership looks like Sen. John McCain’s vote against repealing Obamacare. It was a tough call for him, but he realized what was at stake and it forced the health-care change efforts back into the normal channels that allow citizen involvement — exactly what he spoke of on the Senate floor.

Leaders must also have a vision and set a clear course toward that vision. In fact, the bigger the organization, the further ahead that course must be set. A helpful visual is to compare steering a speedboat to steering an aircraft carrier. Whereas a speedboat can turn on a dime, the captain of an aircraft carrier must plan miles in advance to turn the ship.

The federal government is a big ship, and its leader can’t effectively guide it by constantly shifting positions to fit the latest news cycle, nor by tweeting out policy changes at 3 a.m.

Speaking of tweets, good leaders know that no one cares about their problems. Have an issue with the reported size of the inaugural crowds? Guess what? Nobody cares! There are many people who have real problems in our country. They want a leader focused on making their lives better, not on complaining about something that happened six months ago and never was important.

The bottom line is, when it is all about the leader, it isn’t about his people. Plain and simple, leaders need thick skin, big hearts and a consistent focus on the goal.

Another important tenet of leadership is that leaders must praise in public and criticize in private. Just like our mothers told us: If you don’t have anything nice to say, don’t say it in a tweet. Leaders succeed only when their people succeed. A president succeeds when the country succeeds.

The mantle of leadership is heavy and there are ample rewards, but they come at a cost. Effective leaders understand they must subordinate their “I” in the interest of the larger “we.” In the end, a true leader never has to remind anyone he or she is the boss.

As “Iron Lady” Margaret Thatcher once famously said, “Being powerful is like being a lady. If you have to tell people you are, you aren’t.”

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“Life, Liberty, and the Pursuit of Happiness”

This is an often used, at least in the USA, phrase that Americans employ to justify what they want and expect from their governments. I imagine, as simple as it is, it means vastly different things to each person who thinks about it.

I was asked to be on a panel once, with two Democrats and two Republicans, answering questions about different, broad subjects. One question was something like, “What is the role of government in our personal lives?” I think each of us answered equitably, that government has no role in our personal lives, or at least shouldn’t. My answer was last, and quite emphatic. There is an, “however,” though. Of course. I don’t think government ought to tell me how to live, but I think it is the role of government to create parameters that maximize my ability to live as I wish to live, i.e., with maximum personal liberty.

This is where things get tricky. As long as I am within ear-shot, or choose to travel within ear-shot of anyone else, now government has a role. For two bodies within close proximity that may interfere with each other’s maximum liberties must have an agreement for how to deconflict their exercise of their liberties. If you add even more bodies to the formula, and I go shopping at a mall, or go to a concert, or even just drive my car down the road paid for by all of us, and in cooperation with other drivers so we don’t interfere with each driver’s ability to get to their destinations, then we really need someone/something to create sets of minimum parameters that we all abide by so we don’t disrupt others’ exercise of liberties. Now it’s really complex. And I haven’t even begun to describe the layer upon layer of situations that could potentially collide to inhibit my liberties.

Do I need to be able to breathe clean air and drink clean water in order to have liberty? Is it within the definition of “my liberties” to have local wildlife roaming freely for me to enjoy? If that wildlife becomes destructive to my property, is it within my liberty to destroy that wildlife, even if it means others cannot continue to enjoy it?

These are not easy questions, and certainly give rise to a recognition that we need some sort of rules for how we live together. With more and more people populating the earth, we have more and more potential for interfering with each other’s liberties, and maybe increased need for rules.

The common ground? I believe we all want as few rules, i.e., laws, as possible, to maintain freedom and liberty for all. As our world gets more complex, there is a need for more laws, despite our desire for minimal interference from government. Governments which, by the way, are actually the voices of all the other people represented on the opposite end of the scales from each of us, trying to balance the liberties of everyone.

We’ve only begun to try to find the common ground. I feel like a person trying to lay a thousand square miles of carpet, one tile at a time. We’ve put down a couple.

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What Do We Agree On?

If we are going to start from points of commonality, and try to end at actions to take which may get us back to our commonly desired results, we need to begin the journey with open minds and a clean slate.

Admittedly, My mind is not as clean a slate as maybe it should before this exercise, but I’ve been reading Jon Meacham’s “Thomas Jefferson: The Art of Power,” and it transports me to the time before the U.S. Constitution was written. I’ve intermingled that reading with various other historic and current political articles, such as The Federalist Papers, and I find myself wishing our fore fathers had been able to better predict the 21st Century US. However, I have a renewed respect for their understanding of human nature and sociology.

If I were on a team trying to write a constitution for a new country, beginning now and going forward, what would I want to make sure existed within the goals of the team to be embodied in the framework set out in that constitution? Then, having the advantage of many historically developed examples, how should it be written to best serve the generations that will unfold from this day forward?

Let this be the defining purpose of this blog. Over the next many writings, I shall record my personal thoughts within this mind set, a clean slate with personal knowledge that influences my thinking, as was the case for every signator of our country’s Declaration of Independence and Constitution.

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