Arizona Lawmakers considering “largest local-revenue cut that has ever been proposed”

Amidst debate for a $12.4 billion state budget proposal, state lawmakers have proposed a transition to a flat-rate income tax at 2.5% statewide. The transition would occur over the next two years, and is estimated to permanently reduce state revenues by $1.5 billion annually (AZ Republic).  While the change would apply to all taxpayers in the state, the benefits are heavily concentrated with the state’s top earners, as the Institute on Taxation and Economic Policy finds that 91% of the reductions would go to the top 20% of Arizona taxpayers.

Proponents of the flat-rate system cite the state’s anticipated ongoing surplus of $1.5 billion following an economic rebound and massive federal stimulus funding. Rep. Ben Toma (R-Peoria) and other supporters view this an unprecedented opportunity to reduce the tax burden for Arizonans and “make Arizona economically appealing”.

Critics of the proposal argue that this surplus is instead an opportunity to address important problems in the state like education, which is consistently ranked in the lowest five states nationally. There is also fear that reducing tax revenues now will be difficult to reverse and may inhibit the state’s ability to fund critical functions in the future, with the plan threatening the $225 million annually shared with municipalities. Tom Belshe, executive director of the League of Arizona Cities and Towns claims, “It’s the largest local-revenue cut that has ever been proposed,”. Sen. Paul Boyer (R-Glendale) was quick to remind his colleagues that this could mean severe cuts in public safety and may even defund the police, a political hot button Arizona lawmakers avoid resolutely.

The larger budget in which this proposal is housed was approved by GOP leadership and Republican Governor Ducey, but the plan is not yet supported by all Republicans in the state congress. This means Democratic support for the proposal may be necessary, it would, however, likely come with a number of expensive conditions for Republicans.

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