How Does Lowering Business Taxes Pay Dividends?

By Alan Olsen, CPA, MBA (tax)
Managing Partner
Greenstein Rogoff Olsen & Co. LLP


Although most businesses and individuals find their tax bill to be too high, there are some that find the never-ending changes to tax laws and rules even more frustrating. Sometimes it feels that tax laws can be so complicated that all you can do is throw your hands up in the air and wave the white flag. In fact, to some it may feel like this is exactly what the IRS is shooting for. State taxes can be just as complicated, as those who live in California know all too well. Now imagine if the IRS or a state actually tried simplifying taxes. It will never happen right?

Simplify Taxes – Grow Business

Just like the debate over Coke or Pepsi, the tax debate will also never end. However, there are proven ideas that can actually help businesses grow, one of which is to simplify taxes. The state of Arizona has adopted this philosophy over the past several years and the idea that less is really more when it comes to taxes is paying dividends for businesses, as well as the state. By consistently lessening the tax burden on companies, Arizona continues to rank high as one of the best states to do business.

Real Growth

Recognition and accolades are great, but the real story is in growth. The biggest news for Arizona is that its economy continues to improve and expand and job growth is expected to keep ticking up. That equals more interest from new companies looking for a place to start a business. All of that good news comes in large part to Arizona’s simplified tax policies for businesses.

Easing the Tax Burden

So what exactly has Arizona done to achieve its success? One of the biggest steps the state took was to enact the Arizona Competitiveness Package. This package was designed to create tax incentives and credits for venture capital investments, sustainable manufacturing and the development of technological research. It was designed to be a performance-based incentive plan to attract and keep high-wage job creators to the state; and so far it’s working.

Better Tax Environment

The state didn’t stop there, though. A year after enacting the Competitiveness Package, Arizona made a big push to lower its capital gains tax. That plan will serve to drop the capital gains tax all the way to 3.4 percent by 2016, which will make it one of the lowest rates in the U.S. By comparison, California’s capital gains tax rate is a staggering 13.3 percent. Businesses are also allowed to carry net losses with them down the road into forthcoming tax years. That’s essential for many start-up companies to survive in their first few years of business.

State Sales Tax Relief

Meantime, Arizona governor Jan Brewer has also worked with tax experts and business leaders to improve the state’s sales tax system and make it much easier to manage for retailers.

Boost Manufacturing

But wait, there’s more. Arizona even took big measures to help strengthen the manufacturing sector in the state. The state has cut taxes for manufacturers in several ways, including eliminating sales tax on electricity and consumption of natural gas. Lawmakers also introduced a new law that will give tax credits to manufacturers that invest large resources into renewable energy solutions.

Less Is More

All of these measures add up to make Arizona a continually more attractive place for companies to do business, which is just more proof that when it comes to taxes, less, really is more.




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