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Arizona governor axes 2 of 3 tax cut bills

Bob Christie, Associated Press

PHOENIX (AP) -- Gov. Jan Brewer on Wednesday vetoed two of the three remaining bills from the Arizona Legislature's 2013 session but signed a big tax cut bill for businesses on the final day for her to act.

Brewer axed a bill that would have automatically adjusted tax brackets for inflation and cut state revenue by about $11 million a year. Brewer said in a veto letter for House Bill 2439 that the Legislature should consider adjustments yearly after reviewing the budget.

"Similar to statutorily required spending increases, automatic inflation adjustments on the revenue side of the ledger hinders future decision-making and may create a structural imbalance over time," Brewer wrote.

The bill was designed to keep taxpayers from creeping into higher tax brackets as they earned higher salaries over time.

She also vetoed a bill by Republican House Speaker Andy Tobin that increased a refundable research and development tax credit by $5 million in 2014 and $10 million thereafter. She said the refundable credit in HB2342 could have drawn on state tax dollars and deserved more scrutiny on its effects on the overall economy and its relative importance among other spending obligations.

"My decision on this bill must be in the contest of the other tax changes and spending items that have come up with the enacted budget," she wrote. "Therefore I believe it is best to re-examine this proposal in light of next year's spending priorities.

Tobin, from Paulden, said his bill was the only tax measure that would have helped businesses in rural Arizona and fell victim to the lack of a normal budget process this year. The Republican governor negotiated a budget with a handful of Republicans and all the Democrats after conservative Republicans dug in their heels on her Medicaid expansion proposal and she had to call a special session to get it passed.

"That's part of the problem with having no budget deal," Tobin said. "Obviously the R&D tax credit was popular on both sides of the aisle so we felt that was a good place to go. The current status of that R&D tax credit is that all those dollars are usually used up in the March, April May time frame. So we clearly know if anything's working, that's it."

Brewer signed a bill lifting a cap on the amount of depreciation small and medium-sized businesses can claim instantly on new equipment. HB 2531 is expected to save businesses about $25 million this budget year by allowing them to write off the cost of equipment all at once instead of over time.

Although that bill had the highest price tag and wasn't part of the approved budget Brewer signed last week, her spokesman said the bill just shifted the write-offs.

"Over time the fiscal impact should be a wash, since the bill is simply allowing businesses to take their depreciation on equipment up front rather than over a course of years," Benson said in an email.

Wednesday's action officially ends the Legislative session, which adjourned on June 14. Brewer signed 256 bills and vetoed 26.