Arizona's tax break on business equipment aims to spur economic development
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Companies will get a break on the personal property taxes they pay on equipment, which members of the business community hope will help spur economic development and attract major manufacturers to Arizona.
- Personal property is defined as non-real estate property, including machinery, computers, farm equipment and restaurant ovens.
Driving the news: Gov. Doug Ducey signed House Bill 2822 in March, which achieved a years-long goal of Arizona's business community to reduce the state's business personal property tax burden.
Why it's important: Arizona is becoming an increasingly competitive destination for high-tech manufacturers such as Intel and Taiwan Semiconductor Manufacturing Co.
- Chris Camacho, president and CEO of the Greater Phoenix Economic Council, says the savings will be considerable to high tech manufacturers that sometimes invest more than $1 billion in their facilities.
- Camacho tells Axios Phoenix that it's difficult to determine the effect of the state's personal property tax rate because companies often don't explain why they passed up Arizona for another market.
- Chad Heinrich, who leads the Arizona chapter of the National Federation of Independent Business, says the lower tax burden will encourage smaller businesses to buy new equipment as well.
Of note: The law isn't retroactive, so companies won't get a break on equipment they already own.
What they're saying: "I think this is one of the most consequential bills passed in 20 years for economic development in our state," Tim Lawless, president of Commercial Real Estate Executives for Economic Development, tells Axios Phoenix.
- Lawless says the new law will give Arizona an advantage over Texas because its 10-year personal property tax abatement law recently expired, and proposals to renew it fell through during this year's legislative session.
Details: The Arizona Constitution dictates that personal property be taxed, which has complicated previous efforts to reduce the tax burden.
- Rather than seek a voter-approved amendment to the state constitution, the legislature adjusted the depreciation schedule, effectively lowering the tax burden by lowering the assessed value.
Yes, but: Other property owners will be the ones who pick up the tab on the tax breaks.
By the numbers: Arizona is expected to lose $23.4 million in tax revenue this fiscal year as a result of the law, according to the Joint Legislative Budget Committee.
- The Maricopa County Assessor's Office estimates that the law will reduce property tax revenues in the county by about $31 million.
- The assessor doesn't know what effect the law will have on other property owners' tax bills, and spokesperson Devero Bogart tells Axios Phoenix that much will depend on what type of property they own and where in the county they're located.