State representative Steve May (R-Paradise Valley) has introduced a bill that would allow contractors to sign multi-year contracts prior to the June 1 enactment of sales tax hike earmarked for education.

"Since margins in the construction industry are extremely low due to intense competition, tax-rate changes made after the initial bid will be a hardship to many," says a memo to Gov. Hull from the Arizona General Contractors Association. "Contractors are stuck with absorbing the tax increase as a loss."

The bill proposes that contractors who placed bids prior to the passage of the sales-tax increase last November should be exempt from paying the additional .06%.

State sales tax is set to increase from 5% to 5.6%. The additional tax will raise an estimated $450 million annually for improvements to the state's educational system, including more teachers, smaller class sizes, five additional school days, repairs at school, teacher raises of about $2,000 each and university grants.

But Governor Jane Hull, who led the campaign to pass Proposition 301, says the bill would allow contractors to avoid paying tens of million in taxes that other Arizona businesses and individuals will have to pay. Contractors would rush to sign long-term contracts prior to the June increase, thereby avoiding paying the increase they should rightfully pay, opponents of the bill say.

Both sides of the issue say that estimating the cost of the bill is impossible. Hull would like to place a cap on how much the contractors could avoid paying in additional taxes, but a compromise on the issue doesn't look eminent.