Phoenix, Arizona - Arizona Republicans are taking advantage of a unique opportunity to make their state a more attractive to live and invest and, more importantly, protecting taxpayers across the Grand Canyon State from an income tax hike.
As an unintended consequence of the federal Tax Cuts and Jobs Act (TCJA) – which significantly reduced individual and corporate income taxes and resulted in 90 percent of wage earners having higher take-home pay and the lowest unemployment in 50 years – Arizonans will be left facing a tax hike at the state level if no actions are taken to prevent it.
Due to the way Arizona’s tax code conforms to the federal tax code, simply conforming to the new federal code would result in a net income tax increase unless lawmakers include provisions to offset it. Fortunately for taxpayers, Republicans in both chambers have remained committed to following the lead of lawmakers in other states, such as Iowa, Georgia, and Michigan, and finding a way to return the conformity revenue back to the taxpayers.
Grover Norquist, president and founder of Americans for Tax Reform, sent lawmakers a letter in support of this efforts. The full text of the letter is pasted below:
May 24, 2019
To: Members of the Arizona Senate
From: Americans for Tax Reform
Re: Protect Arizona Taxpayers
On behalf of Americans for Tax Reform (ATR) and our supporters across Arizona, I urge you to keep taxpayers in mind as the 2019 legislative session comes to close. Legislation that would result in a net tax increase will be scored as a violation of the Taxpayer Protection Pledge.
As an unintended consequence of the federal Tax Cuts and Jobs Act (TCJA) – which significantly reduced individual and corporate income taxes and has resulted in 90 percent of wage earners having higher take home pay and unemployment hitting a 50-year low – Arizonans will be left facing a tax increase at the state level if no actions are taken to prevent it.
Due to the way Arizona’s tax code conforms to the federal tax code, simply conforming the state code to the new federal code would result in a net tax increase unless rate reductions or other provisions are included to offset it. Fortunately, legislators in both chambers have remained committed to doing just that by following the lead of lawmakers in other states, such as Iowa and Georgia, and returning this portion of their constituents’ federal tax cut back to them in the form of pro-growth tax reform.
One proposal would both hold taxpayers harmless and make Arizona’s tax code more competitive by collapsing Arizona’s five individual income tax brackets into three, taking the rates from 2.59, 2.88, 3.36, 4.24, and 4.54 down to 2.85, 3.35, and 4.38. Importantly, this proposal would also increase the standard deduction from $5,300 to $12,000 for individual filers and $10,600 to $24,000 for those filing jointly.
The larger standard deduction would expand the zero bracket and ensure that most low-income earners still receive a tax cut.
In addition to preventing an income tax hike, this proposal would make Arizona more conducive to economic growth. A lesser-circulated fact is that many small businesses file under the individual tax code. As such, a lower top individual income tax rate would allow business owners to keep their resources invested in jobs, wages, and businesses operations rather than bloated government spending programs.
This three-bracket proposal or similar proposals to offset the tax increase that would result from conforming to the federal tax code would be a step in the right direction for Arizona taxpayers and should be supported, so long as all of the tax changes in the bill score as revenue neutral on net at most.
ATR applauds your commitment to using pro-growth tax reform as a way to return the excess revenue that will be collected from conforming Arizona’s tax code to the federal tax code back to taxpayers. Legislation that would result in a net tax increase should be rejected on principle and will be scored as a violation of the Taxpayer Protection Pledge.
Americans for Tax Reform