Arizona Gov. Katie Hobbs says she vetoed $1.1 billion Republican tax cut plan

PHOENIX – Arizona Gov. Katie Hobbs announced Friday that she vetoed the tax cut plan passed by Republicans a day earlier.

SB 1106 was the first bill to reach Hobbs’ desk during the new legislative session, which started Monday.

Republicans are calling it the Arizona One Big Beautiful Bill because it would apply President Donald Trump’s tax cuts to the state tax code. The GOP said its plan would deliver Arizonans $1.1 billion in tax relief over three years.

Hobbs, a Democrat, is pushing her own code update called the Middle Class Tax Cuts Package.

What’s in the tax cut plan Gov. Hobbs wants to pass?

The governor’s plan calls for a $6,000 deduction for seniors and increases to standard deductions on state tax forms. It also includes deductions for tipped income, overtime pay and interest on loans for new American-made vehicles.

#Breaking: Gov. Katie Hobbs has announced she has vetoed AZ GOP tax cut bill. Plans to release her budget including her own version of tax cut package this afternoon.@KTAR923

— Colton Krolak (@ColtonKrolak) January 16, 2026

“Passing that package will make tax session easier for middle-class families and the Department of Revenue, reduce complexity and give us the time needed to discuss the rest of tax conformity in budget negotiations. I made clear what bill I would sign at the beginning of session, one that cuts taxes for the middle class, and that’s it,” Hobbs said during a press conference.

Hobbs criticized Republicans for putting forth their own tax code update without negotiations.

“Instead of working with me to put the middle class first, the Republican majority has chosen to engage in political theater and sent me a partisan bill. It’s a bill that puts billionaires and special interest first. … And they have no plan to pay for it,” she said.

Hobbs indicated she planned to reveal her budget proposal for the next fiscal year later Friday.

What’s at stake in fight over Arizona tax code?

The Arizona tax code issue affects this year’s returns and could create confusion among filers if not resolved soon.

Republican Sen. J.D. Mesnard told KTAR News 92.3 FM’s The Mike Broomhead Show he was disappointed in the governor’s veto.

“What that does is put the priority of the taxpayer on the backburner, which is deeply disappointing,” said Mesnard, chair of the Senate Finance Committee. “We can both budget appropriately and also give the money rightfully owed to the taxpayer back to them and create certainty as they’re going into tax filing season. This has just sown chaos, or really continued the chaos that she started two or three months ago. It’s very, very disappointing.”

Mesnard said he wished Hobbs would have called a special session to address the tax code issue last year and indicated that the Republican plan won’t be easy to change.

“We think the entire package is helpful because it includes help for working families, seniors, small businesses,” he said. “It’s hard to say, ‘Well, which one of those should we cut?'”

However, Mesnard acknowledged that time is of the essence with tax season looming.

“Obviously, we need to get certainty to the taxpayer considering filings are starting. And so there’s a little bit of a gun to our head here,” he said.

Arizonans typically start filing their taxes by the end of January, well ahead of the April 15 federal deadline.

“We’re going to negotiate as best we can, but time is of the essence at this point. This is why we took the fastest action I recall us ever taking this early in session to try to get a bill to her desk and now we’re sort of back to square one,” he said.

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