ARIZONA NEWS

Arizona Republican lawmakers eye tax cut changes to avoid referendum

Dec 31, 2021, 5:00 PM

PHOENIX (AP) — Arizona Republican lawmakers who pushed through a nearly $2 billion income tax cut in the last session are looking to repeal it and replace it with a new version, a move that would end a voter referendum that has stopped the tax cut law from taking effect.

The acknowledgment from Rep. Ben Toma and Sen. J.D. Mesnard, key architects of the flat tax proposal and bills that sidestep a tax on the wealthy that voters approved in 2020, comes a week after a judge rejected a challenge to the referendum.

And it’s not just the referendum itself, which has put the Republican-controlled Legislature’s $1.9 billion income tax cut on hold, that is the problem. Toma noted that getting his flat tax proposal enacted involved a series of agreements to get other Republicans on board.

That includes an increase in the amount of income taxes sent to cities from the current 15% to 18%, a deal that was designed to shield those governments from the state revenue cuts. Cities would get a big windfall if the tax cuts go away.

“This really was, in every sense, a budget conversation,” Toma said this week. “It was, as a matter of fact, the budget conversation. That was the one thing that needed to be solved in order to get a budget this past year.”

On the table is a potential full repeal and replacement of the tax cuts, which will be phased in when revenue targets are met, starting at $1.3 billion this year, Toma and Mesnard said.

When fully phased in, the plan would lower tax rates for most taxpayers to 2.5%, down from a range of 2.59% to 4.5% and cut state revenue by $1.9 billion. Wealthy taxpayers would also be spared from the tax hike approved by voters in 2020 to boost school funding.

The tax cuts mainly benefit the wealthy. The average Arizonan earning between $75,000 and $100,000 will save $231 a year in state income taxes, while the average taxpayer earning between $500,000 and $1 million a year will save more than $12,000, according to the Legislature’s budget analysts. And the bills creating big carve-outs to Proposition 208 save the wealthy hundreds of millions.

Groups that put Proposition 208 on the 2020 ballot to boost school funding were incensed with the tax cuts and the workarounds to the initiative’s 3.5% tax surcharge on high-earners.

The state Supreme Court in August found a key part of Proposition 208 unconstitutional and said its must be voided entirely if a trial court finds the new revenue puts schools over a voter-approved spending limit. That’s likely, since schools are already bumping up against that limit.

After the $12.8 state budget package was passed in June, they worked to collect enough signatures to block the tax cuts and the two bills gutting Proposition 208 revenue. They only managed to block the big income tax cuts.

Tax cut opponents contend underfunded Arizona schools and social programs need the cash more than the wealthy. They had to file more than 118,000 valid signatures to block the tax cut law and place it on the November 2022 ballot. The Secretary of State’s office said that after its reviews and county officials an estimated 163,000 were valid. It was certified in November and could be on the ballot as Proposition 307 in November 2022.

The group, Invest in Arizona Now, has so far fended off a court challenge to the referendum trying to repeal the tax cuts included in Senate Bill 1828. Last week a judge rejected arguments from the Arizona Free Enterprise Club that the state constitution does not allow tax cut laws to be referred to the ballot. That decision is being appealed to the state Supreme Court.

David Lujan, who leads the group Children’s Action Alliance that was part of the coalition backing the referendum, said voters will not be happy if the Legislature repeals and replaces the tax cuts and avoids the referendum.

“I would say I would proceed with extreme caution if I was any lawmaker that was inclined to support something like that, because polling shows that Arizona voters overwhelmingly support this referendum,” Lujan said Thursday.

Mesnard said the combination of the referendum blocking the income tax cuts and the Supreme Court ruling on Proposition 208 will require GOP lawmakers to act. No Democrats backed the tax cuts.

“So given those two factors, my suggestion would be to repeal it,” Mesnard said. “Take a look at the new landscape, post the court’s ruling, and pass a different tax package.”

State revenues continue to soar, with a huge surplus approaching $2 billion even if the $1.9 billion tax cuts go into effect, Toma said.

“A full repeal and replace of the tax cut is on the table,” Toma said. “Our revenues are considerably different in a good way than they were even when we passed this bill.

“And a more clean bill that reflects the reality of where we are, I think that’s also a potential option,” he said.

Lifetime Windows & Doors

We want to hear from you.

Have a story idea or tip? Pass it along to the KTAR News team here.

Arizona News

(Pexels Photo)...
KTAR.com

Stage 2 fire restrictions set to begin this week across Arizona due to wildfire threat

Stage 2 fire restrictions are set to begin across Arizona this week due to heightened wildfire activity and dry conditions, officials said.
1 day ago
(Photo by Hyoung Chang/The Denver Post via Getty Images)...
Associated Press

Arizona appeals court says ban on per-signature initiative is illegal

A 2017 law that makes it a crime to pay people for each signature they collect to qualify voter initiatives for the ballot violates the First Amendment and the first criminal case filed using the law must be dismissed, the Arizona Court of Appeals ruled Tuesday.
1 day ago
(Facebook Photo/Phoenix Police Department)...
KTAR.com

Suspect in custody after allegedly exchanging gunfire with Phoenix police

A suspect was in custody after allegedly exchanging gunfire with police in north Phoenix on Tuesday, authorities said.
1 day ago
Law enforcement personnel stand outside Robb Elementary School following a shooting, Tuesday, May 2...
KTAR.com

Arizona politicians react to mass shooting at elementary school in Texas

Arizona politicians reacted Tuesday to a mass shooting at an elementary school in Uvalde, Texas, that left 19 students and two adults dead. 
1 day ago
FILE - Water drips from a faucet near boat docks sitting on dry land at the Browns Ravine Cove area...
Associated Press

EXPLAINER: How cities in the West have water amid drought

Major Western cities like Phoenix have diversified water sources and boosted supplies through infrastructure investments and conservation.
1 day ago
(Photo courtesy of Jonathan Lines)...
Danny Shapiro

Yuma border migrant backlog an ongoing problem despite Title 42 extension, official says

Yuma County Supervisor Jonathan Lines said the border community continues to deal with an influx of migrants that want to come to the U.S.
1 day ago

Sponsored Articles

...
Carla Berg, MHS, Deputy Director, Public Health Services, Arizona Department of Health Services

ADHS mobile program brings COVID-19 vaccines and boosters to Arizonans

The Arizona Department of Health Services and partner agencies are providing even more widespread availability by making COVID-19 vaccines available in neighborhoods through trusted community partners.
...
Dr. Richard Carmona

Have you gotten your booster shot?

Do you remember when you got your last COVID-19 vaccination? If it has been more than five months since you completed your primary vaccination series, it’s time for you to get your booster. You may be eligible even sooner depending which vaccine you received. If you are over the age of 50 and received your […]
(Twitter photo / Coco5)...
Coco5

Suns star Devin Booker’s all-natural sports drink Coco5 perfect for any activity

Devin Booker is leading the Suns in pursuit of their first NBA championship while also working to provide people proper hydration with Coco5.
Arizona Republican lawmakers eye tax cut changes to avoid referendum