Lawmakers Hope Electricity Tax Break Will Boost Manufacturing In Arizona
During her time as the state's chief executive, Gov. Jan Brewer has pushed for policies she thinks will make
Standing in his office at Nichols Precision in the East Valley, Dante Fierros showed off the intricate parts his company manufactures.
"This is a small, titanium, very complex part that goes somewhere on a standard missile. They won't tell us where that is, but it's very important. And this little gold-plated, intricate piece is on the Mars Land Rover," said Fierros.
His company makes parts for things including defense equipment, race cars, and medical devices. It is a 12,000 square foot business where a couple dozen people work at about as many machines.
"This [machine], for example, is a five-axis Swiss-style machine, which means nothing to the layperson," Fierros said. "So I equate this to say, this one's a Ferrari, and that one over there's a Ford pickup, and that one over there's a Yugo, or whatever."
Most days, Nichols Precision runs a double shift. Workers are at it from 6 a.m. until after midnight, and they are burning not just the midnight oil but lots and lots of electricity too.
"I can visualize the bill," Fierros said. "It's large!"
But if Gov. Brewer gets her way, that utility bill will shrink. She has asked the legislature to do away with the sales tax on electricity that manufacturers pay, somewhere between 8 and 10 percent.
"We're talking about the smallest manufacturer all the way up to the biggest," said Michael Hunter, the governor's policy director.
He said this idea was influenced by conversations with manufacturers.
"We know that they're concerned about their costs, and electricity cost is a major thing that they're going to be looking at," Hunter said. "When they see that we're also taxing that high energy cost, that's not a good story."
"Now, that sounds like a big number, unless you look at it being part of the $500 million slice," Hunter said. That's how much sales tax the state collects from everyone on things like electricity, water and natural gas. "There's a couple things that tells you. Probably the most significant thing in my mind that is says is that we do not have a robust manufacturing sector in
"To say that this is petty cash that's, you know, unattractive, I don't agree with that," said Rep. Andrew Sherwood, a Democrat who sits on the House Appropriations Committee.
He said after huge cuts during the recession, the state is only funding critical services right now, sometimes, not even those, and Sherwood thinks even small amounts can make a difference.
"We see bills for just a small appropriation, like $250,000, that can go a long way to something like the seriously mentally ill, or some kind of health diagnosis," Sherwood said. "I've got another bill right now that could help create a pilot program for smaller school classroom sizes."
So losing revenue does not exactly sit well with Sherwood, especially since there is no guarantee that more manufacturers will move here and make up the difference, and some skeptics say
Still, Hunter said they want to attract both new manufacturers and "other business people who recognize the value that the manufacturing sector adds to
The League of Cities and Towns has also objected to the plan because it would prevent municipalities from levying a tax. Last week, the Senate Finance Committee voted unanimously in support of the bill.