Legislature taking up tax cuts for manufacturers after passing budget

PHOENIX - Just a day after adopting a $9.23 billion state budget, the Arizona House and Senate have given final approval to a pair of tax cuts for manufacturers, including one that would give a multi-million tax credit to the world's biggest corporation to install and run a solar facility.

The Legislature approved House Bill 1413, pushed by Gov. Jan Brewer, eliminating sales taxes on electricity purchased by manufacturers and mining smelters that is expected to cost the state general fund $17 million a year. Brewer called for the elimination of the tax in her State of the State address in January, saying it was needed to make Arizona more competitive and draw new manufacturing to the state.

Another bill, HB 1413, specifically targets Apple Inc.'s planned Mesa sapphire glass manufacturing plant by providing a $5 million tax credit if it installs at least $300 million in renewable power capacity to supply its plant.

That proposal drew criticism from conservative Republicans in the House, who said it was picking winners and losers among industries and subsidizing renewable energy.

"We as conservatives have got to step away from this crony capitalist style of development," said Rep. Adam Kwasman, R-Oro Valley. "We cannot afford to pick winners and losers in industry. We believe in low taxes for everybody. We believe in simple rules for everybody."

The so-called "Apple bill" could apply to at least one other manufacturer, if one materializes.

Sen. Bob Worsley, R-Mesa, carried the Apple bill, saying he did it because the Arizona Commerce Authority had promised it to the company as part of the deal to draw them here.

"I believe that they did the right thing to bring Apple here," Worsley said in a recent interview. "And the dollars are very small in the whole scheme of things with Apple being in the Valley. They could have gone to Texas, they could have gone other places and we wanted them here. It's a good decision."

Tech giant Apple said in November it will open a manufacturing plant in the Phoenix suburb of Mesa that will eventually employ 700 workers and provide material currently used only in its iPhone 5 cameras and fingerprint reading sensors.  The company said is expanding its U.S. manufacturing operations in a former First Solar plant in Mesa. The city southeast of Phoenix already hosts a long list of high-tech manufacturing firms.

In addition to the $10 million grant to Apple, the contractor that will run sapphire-creating equipment at the plant may also qualify for a refundable income tax credit equal to 10 percent of its capital investment, or $20,000 per job, and for job training cash. At most, the tax credit is worth $14 million if 700 jobs are created, the agency said. GT Advanced Technologies plans to install and own furnaces to create sapphire at the plant.

The commerce authority, a quasi-private agency that acts as the state's economic development arm, is charged with luring companies to the state and has a series of incentive packages at its disposal.

It apparently made the promise on the Apple renewable energy tax contingent on Legislative approval. An ACA spokesman didn't immediately return a call seeking comment.

Andrew Wilder, Brewer's spokesman, said she had taken no position on Worsley's bill. But he said she pushed for the elimination of the sales tax on the power manufacturer's use. Companies look closely at power costs, and only a handful of other states tax it for industries.

"Gov. Brewer's mission all along has been to position Arizona for the future," Wilder said. "She said in her state of the state address that manufacturing is more than just an industry. Manufacturing drives jobs, and Arizona needs more of it and Arizona can be more competitive."

Both bills passed with strong bi-partisan majorities in each chamber, despite the defection of roughly half the Republican caucus on the Apple bill in the House. They now head to Brewer for action.

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