So your client wants a big tax break and he's willing to pay big bucks to get it through the legislature and then the Arizona Republic points out that he's the richest guy in Arizona...next you will be standing in front of thousands of people and you will realize that you don't actually play the Violin....must run away from the werewolf...but legs are moving so slowly...
Ok, I shouldn't exaggerate, Sperling isn't the richest guy in Arizona, he's actually number 4 and his son--who benefits just as much from the tax break--is number 5. So I guess they are technically just the richest family in the state. Here's how the Republic put it.
...and University of Phoenix founder John Sperling and his son Peter Sperling with $1.3 billion and $1.2 billion, respectively.
Here's a little more about their attempt to get a tax break through the legislature.
Here's a nice little piece about some of their political contributions...Giffords, Mitchell, Kirkpatrick, Chris Dodd...I think I detect a pattern.
Of course, none of this is surprising. The ultra-rich are almost always Democrats, they donate their money to liberal causes and they want favorable treatment in return. Didn't you ever take a political science course?
Of course the Patron Saints of Political Consulting always open a window even as they are closing a door...the Sperling tax cut makes for bad lobbying, but it's great for the political consulting business.
Check out this ad (Click here for a clearer copy)...I'm sure you will see a copy of it this November.
(In case it's not completely obvious, I made this ad up from scratch. It's not a real ad although I will say that I'm pretty proud of it.)
Anyone know how many new jobs would be created if a company like that didn't have to pay so much in taxes?
Posted by: Winnie | March 12, 2010 at 07:57 PM
I thought the Good Book said that having money wasn't a sin - only the love of money was a sin.
Posted by: ron | March 12, 2010 at 08:10 PM
Before anyone jumps to conclusions on this, one should ask the question why are so many Republican legislators voting yes on this "apparent tax giveaway” to the University of Phoenix? The simple answer is it is not a giveaway.
Arizona’s long standing law requires businesses that are domiciled in Arizona and conduct the majority of their operations here to pay taxes in Arizona. Seems like a reasonable law; however, times have changed. Most states now allocate taxes based on where the services are delivered. That means if you provide education to students in other states you pay taxes on the pro rata share of revenue and income earned in that state to that state.
For example, The University of Phoenix operates in Georgia. They pay taxes on the income earned in Georgia and then also pay again in Arizona. I believe this would be called double taxation. If the University were domiciled in Georgia, under Georgia law, they would not pay taxes to Georgia for income generated in Arizona. This is actually the case for Cox Communications, which is domiciled in Georgia.
This is the inequity that the proposed change in the law would rectify and the reason so many Republicans support it. If the University of Phoenix continues to be doubled taxed in Arizona, it may decide it would be better to be headquartered in another state that has equitable tax laws.
Posted by: Randy Pullen | March 13, 2010 at 10:10 AM
Well, Randy, the bill is dead because most Republican legislators figured out that the bill as Apollo wanted it was going to raise taxes on a wide range of Arizona businesses, and cut taxes on Apollo, with no measurable economic benefit. The income tax allocation formula already accounts for proportions of sales in each state, but also includes proportions of property and payroll.
Posted by: Jack | March 16, 2010 at 09:50 AM
Jack, actually, the current Arizona income tax allocation formula for sales of services DOES NOT already account for proportions of sales in each state. Actually, that is exactly what HB 2665 is meant to do – to account for proportions of sales in each state. Unfortunately, the current Arizona income tax allocation formula for the apportionment of service revenue is an “all or nothing” allocation based on where the “greater proportion” of the costs are incurred to produce the service revenue. That means companies that have their greater proportion of their costs within the state are required to apportion 100% of their service revenues to Arizona, even if none of their revenue is generated from Arizona customers. Companies that do not have their greater proportion of their cost within Arizona (even though they might have a significant Arizona presence) apportion 0% of their service revenues to Arizona, even if all of their revenue is generated from Arizona customers.
This all or nothing apportionment result under current law creates a highly inequitable result for companies that base the greater proportion of their costs (costs primarily generated by the people they employ) within Arizona and is a disincentive for other companies to do so. That ‘wide range of Arizona businesses’ you mention that would have an increased tax burden under HB 2665 currently have their greater proportion of their costs outside Arizona (in many cases, within states that already have the change that HB 2665 proposes). As a result of their greater cost outside of Arizona, these companies apportion 0% of their revenues to Arizona under current law. And, then Arizona allows them to “superweight” their 0% sales factor, providing them an even larger tax benefit within the state. And this is currently at the expense of service companies that do base their operations in state and have the greater proportion of their costs within Arizona - companies like Apollo Group that base 14,000+ jobs within Arizona.
That sure doesn’t sound like good tax or economic policy to me, but hey, please don’t take my word for it. Leading state and local tax scholar, John Swain, a professor at the University of Arizona wrote a 2008 article on this very issue, titled “Reforming the State Corporate Income Tax: A Market State Approach to the Sourcing of Services”. In that article, he concludes that the current all-or-nothing approach can result in arbitrary and distortive apportionment results and that adopting a market based approach effectuates sound tax policy. Also, the Multistate Tax Commission (MTC) also addressed this issue in a 2009 article, titled “The Project to Revise UDITPA”. In that article, the MTC recommends that the current rule be revised and ideally replaced with a rule that sources service revenue based on where the customer is located. HB 2665 does just that – it ensures that all service revenues are sourced to the location of the consumer – a fair and equitable result that simply conforms with the method already used for tangible personal property.
See below links to the articles mentioned above.
Professor Swain’s article:
http://works.bepress.com/cgi/viewcontent.cgi?article=1000&context=john_swain
Multistate Tax Commission article:
http://www.mtc.gov/uploadedFiles/Multistate_Tax_Commission/Uniformity/Minutes/The%20Project%20to%20Revise%20UDITPA.pdf
Posted by: Manny Rivera, Director, Public Affairs, Apollo Group | March 16, 2010 at 07:00 PM