Republicans just approved a historic budget bill that will provide an income tax cut to all Arizonans. Once fully implemented, this pro-growth tax package will reform the Grand Canyon State’s income tax to a flat rate of 2.5% and leave an additional $1.9 billion a year in the pockets of individual taxpayers, families, and small businesses.
“Today Arizona passed a historic and game changing budget that reduces taxes for all taxpayers and moves Arizona to a flat tax on the road to phasing out the entire state income tax,” said Grover Norquist, president of Americans for Tax Reform. “Already there are eight states with no state income tax. Governor Doug Ducey, bill sponsors Senator J.D. Mesnard and Majority Leader Ben Toma, Senate President Pro Tempore Vince Leach, House Appropriations Chair Regina Cobb, House Ways & Means Chair Shawnna Bolick, and many others worked together to create a brighter future for Arizona.”
People and jobs continue to pour out of high-tax states and into states that impose low- and no-income taxes. Arizona’s status quo – with one of the highest income tax rates in not only its region, but the entire country – has it on the wrong side of this equation.
Currently, Arizona has four income tax brackets ranging from 2.59% to 4.5%, and an effective fifth bracket with a rate of 8% a due Proposition 208’s 3.5% surcharge on certain income. Rather than sitting back and allowing Arizona to get crushed under this high top rate – the part of the income tax that is most often used to make decisions about investment – Republicans worked tirelessly this year to make Arizona competitive.
Under the Republican tax package, Arizona’s income tax will be streamlined to two brackets: 2.55% and 2.98%. When state revenue collections hit certain triggers, those two rates will be streamlined to a flat rate of 2.5%, lower than its current bottom rate of 2.59%.
Contrary to some claims, this is not a “tax cut for the rich.” The Republican tax package provides a tax cut and a rate cut for every single income taxpayer.
Building on this great news, the Republican tax package also includes an aggregate cap of 4.5% to mitigate some of the harm inflicted from Proposition 208. Thanks to this cap, Arizona small businesses will be shielded from a 77% tax increase and Arizona’s top rate will be regionally and nationally competitive.
The Republican tax package, which uses revenue triggers as opposed to other tax increases to reduce income tax rates, is both an inspiration and a model for the growing movement of states looking to phase out their income taxes.
Thanks to leadership of Gov. Ducey, bill sponsors Sen. Mesnard and Rep. Toma, Sen. Leach, Rep. Cobb, and Rep. Bolick, every single Arizonan is a winner under this plan.
Individual taxpayers and families will be able to keep more of their hard-earned money. Small businesses will be able to invest more in new jobs and higher wages. And Arizona will be an attractive place to invest and do businesses, bringing new jobs and opportunities to current residents of the Grand Canyon State.
The bill is now headed to Gov. Doug Ducey, who is eager to sign it into law.