Arizona Gov. Katie Hobbs vetoes Republicans’ 2nd attempt at tax conformity bill

PHOENIX – Democratic Arizona Gov. Katie Hobbs vetoed Republicans’ second attempt at a tax conformity bill on Thursday, extending uncertainty during filing season.

Arizona lawmakers are scrambling to update the state’s tax code to align with changes made last year to the federal code under President Donald Trump’s One Big Beautiful Bill Act.

In Thursday’s veto letter for HB 2785, Hobbs urged the GOP-controlled Legislature to approve the plan she calls the Middle Class Tax Cuts Package. She said anything other than that proposal needs to be negotiated while accusing Republicans of “partisan political theater.”

Hobbs said her package (SB 1203) “would put more money in Arizonans’ pockets without decimating services people rely on.”

The Middle Class Tax Cuts Package calls for a $6,000 deduction for seniors and increases the standard deductions on state tax forms. It also includes deductions for tipped income, overtime pay and interest on loans for new American-made vehicles.

Republicans say their tax conformity plan matches current forms

Both chambers of the Legislature passed HB 2785 on Wednesday. Republicans said it matches the state tax forms already issued and would provide $440 million in tax relief for the 2025 tax year.

The GOP removed the child tax credits and dependent care deductions from the first tax conformity bill Hobbs vetoed. Republicans said their first plan would have delivered $1.1 billion in tax cuts over the next three years.

“This bill is necessary, even if it isn’t the preferred approach I and my Republican colleagues wanted to take,” Senate Finance Committee Chairman J.D. Mesnard said in a press release after HB 2785 was passed.

If the eventual solution requires changes to the current filing season’s state tax forms, taxpayers who file early could be required to refile.

“Don’t file your taxes until we resolve this,” Republican state Sen. John Kavanagh told KTAR News 92.3 FM’s The Mike Broomhead Show on Jan. 30.

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