Governor Doug Ducey (R) has a great opportunity to fulfill his 2014 campaign promise of getting the state income tax “as close to zero as possible.”
House Bill 2752, sponsored by Representative Bret Roberts (R) and co-sponsored Senator J.D. Mesnard (R), would responsibly phase out the income tax over time through the use of revenue triggers. This bill, by returning half of the recurring amount of future surpluses back to taxpayer in the form of across the board rate cuts, would be a huge win for individuals, families, and small business across the Grand Canyon State.
Currently, Arizona has a top marginal individual income tax rate of 4.50%. While this may seem competitive when compared to liberal California, it is a lot less impressive when compared to the rest of the country:
- Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming – and soon Tennessee, as it is in the process of phasing out its Hall Tax on investment income – do not collect income taxes at all.
- New Hampshire, though it does impose a 5.00% tax on interest and dividends income, does not tax wages or salaries.
- North Dakota has a top rate of 2.90%
- Indiana has a flat rate of 3.23%
- Pennsylvania has a flat rate of 3.07%
- Michigan has a flat rate of 4.25%
Lower and lower income tax rates would allow individual taxpayers and families to keep more of their hard earned money, and would allow small businesses who file their taxes under the individual code to invest more in jobs and wages. In addition, putting Arizona’s income tax on the path to zero would make it an even more attractive place to live, invest, and do business. This would bring new jobs and opportunities to the Grand Canyon State.
HB 2752 – which is similar to reforms that have been implemented in North Carolina in the past decade – is sound policy, smart politics, and would make Arizona the model for other states to copy. Unfortunately, the companion to HB 2752 – Senate Bill 1489, sponsored by Mesnard and co-sponsored by Roberts – failed on the senate floor by a vote of 15-15, with Senators Heather Carter (R) and Kate Brophy McGee (R) voting against it.
Now, it is up to the Arizona House of Representatives to advance this responsible, pro-growth concept.