Yesterday, 47 Arizona Republican Representatives and Senators voted to protect Arizonans from a large tax increase and all 42 Democrats and one Republican, Kate Brophy McGee, voted to keep the door open to a massive tax increase on Arizona taxpayers.
Because a tax cut is a pay increase, the federal Tax Cuts and Jobs Act (TCJA), passed in December 2017, has already provided 90 percent of Americans with higher take-home pay, and resulted in more than 750 companies giving pay raises, larger 401k contributions, and increasing investment, among other things.
One unintended consequence of this new law, however, is that due to the way some state tax codes conform to federal tax code, some taxpayers could face a tax increase at the state level if no actions are taken to protect them. If Arizona simply conforms to the federal tax code and does nothing else, taxpayers will be burdened with a roughly $155 million state tax increase.
Fortunately, this will not be the case for Arizonans when Governor Ducey signs the tax reform package passed by the House and Senate Republicans. Rather than simply conforming to the federal code, Senator JD Mesnard (R), House Majority Leader Warren Petersen (R), Speaker of the House Rusty Bowers (R), the freshmen Republicans and all Republicans in the House and Senate except one supported conformity legislation that would offset the boost in state revenue collections by reducing income tax rates across the board.
As a technical note, both changes – conformity and the rate reductions – would only be effective for tax year 2018. This bill will allow individual taxpayers, families, and small businesses across the Grand Canyon State to benefit from the simplicity of conformity without having to foot a higher state tax bill, while lawmakers determine the best way to permanently conform to the federal code without taking any more of their constituents’ hard-earned money.
This legislation becomes law with the signature of Governor Ducey.