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Kimble: Give ‘em a (tax) break

It doesn’t take a rocket scientist to see spacey tax exemptions thrust state’s budget into downward spiral

Seeds, pipes and jet fuel can qualify for exemptions in the weird world of the Arizona tax code.

Seeds, pipes and jet fuel can qualify for exemptions in the weird world of the Arizona tax code.

For those of you planning to build a rocket launching facility in Arizona, I’ve got good financial news:

You won’t have to pay sales tax on material used to build that launch site.

Maybe your plans are different. Maybe they involve airplanes and jet fuel.

When you buy jet fuel, you’ll pay a state tax of 3.05 cents per gallon. But once you buy 10 million gallons of jet fuel in a year, you no longer have to pay the state tax.

What about property taxes? You don’t have to pay them – if your building houses a nonprofit organization that uses volunteers to clean highways.

It’s absurd. There are no plans to build rocket launching facilities in Arizona, and waiving the sales tax on construction won’t change that.

Companies don’t buy millions of gallons of jet fuel based on whether there is a minuscule tax applied. And how many buildings can there be in Arizona used by road-cleaning volunteers?

Yet that’s how Arizona’s tax code is built – with an exemption here for one thing, another exemption there for something else. And then you stand back and look at the whole package and it’s a mess.

Eventually, all the exemptions add up: billions of dollars the state could be collecting but isn’t because of thousands of individual tax exemptions.

Some of them you know about. You don’t pay sales tax on food or medications. You get an income tax deduction for interest on a home mortgage and for donating to charities. And there are tax credits for donating to schools and to organizations that help the working poor.

But that’s just the tip of it. Many exemptions and credits were written into state law in the belief that businesses would come to Arizona or expand their operations here if only they got a little tax break.

With Arizona facing a $3 billion budget deficit next fiscal year, Democrats in the state House have proposed that tax credits and exemptions be put on hold for a year. But that would be a monumental undertaking – and one that would anger almost everyone in the state, for one reason or another.

To get some handle on all the tax exemptions and credits available, the state Department of Revenue compiled a list and tried to estimate how much money could be collected if each exemption was eliminated.

The list is 153 pages long.

The list of sales tax exemptions alone is 21 pages long. And if the state collected sales tax on everything, it would have an extra $10.1 billion. That alone is enough to run state government for more than a year.

Giving a tax exemption to companies buying more than 10 million gallons of jet fuel costs taxpayers about $8.2 million annually – not a huge amount, but a painful hole.

You don’t have to do something as outlandish as building a launching facility to escape sales taxes.

People who eat in restaurants pay sales tax on their meals. But employees who eat in the restaurant where they work don’t. Likewise, food sold to be served in prisons is tax free.

Buy all the seeds, seedlings, roots, bulbs and other “propogative material” you want to produce commercial crops, and there is no sales tax.

“Paper machine clothing sold to a paper manufacturer and directly used or consumed in paper manufacturing” is tax free – although I have no clue what “paper machine clothing” is.

There is no sales tax on “pipes or valves 4 inches in diameter or larger” – as long as they are used to transport oil, natural or artificial gas, water or coal slurry.

You have to pay sales tax if you buy a car, but not if you buy an ambulance.

Tickets sold for college sports are taxed – except for football tickets, which are not.

The way the state taxes liquor is unbelievably complex. The tax is generally $3 per gallon – except wine, which is either 84 cents or 24 cents per gallon, depending on the alcohol content. Malt liquor is taxed at 16 cents per gallon.

If the flat $3 per gallon rate were used for all liquor, the state would rake in an extra $458 million per year – a tidy sum when you’re faced with a deficit.

There are plenty of other tax exemptions – on bingo operations, boxing matches, corporate income taxes, betting on horse and dog races, underground storage tanks and on and on and on.

A millions bucks here, a million bucks there, and eventually it knocks a huge hole in the state budget.

Mark Kimble appears at 6:30 p.m. Fridays on the Roundtable segment of “Arizona Illustrated” on KUAT-TV, Channel 6. He may be reached at mkimble@tucsoncitizen.com or 573-4662.

North Korea fired a missile earlier this week. Had the Koreans launched from, say, Eloy, they could have earned themselves a tax exemption.

North Korea fired a missile earlier this week. Had the Koreans launched from, say, Eloy, they could have earned themselves a tax exemption.

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