Gov. Katie Hobbs on Friday vetoed a $440 million package of tax cuts approved by Republican lawmakers.
The action was anticipated as the governor told lawmakers they should approve her own plan with a $250 million price tag.
But the merits of the two plans aside — and there are sharp disagreements — the stalemate means that Arizonans who file their state income taxes before there is a deal are going to have to refile them once there is a final plan.
And that deal may not come until after the April 15 filing deadline.
All that is because the state Department of Revenue, following traditional procedures, prepared the forms and instructions under the assumption Arizona would conform its tax code to all the changes included in Congress' "Big Beautiful Bill," signed into law last year by President Donald Trump.
It includes a laundry list of alterations, ranging from higher standard deductions and elimination of income taxes on tips and overtime, to various changes in how businesses write off the cost of new equipment.
Those forms conform neither to what the Democratic governor nor Arizona's GOP lawmakers have proposed.
Hobbs doesn't want the business tax cuts. So, if her plan were to somehow become law, anyone who files and takes those deductions would have to file an amended return.
The GOP plan also differs from the federal bill.
Gov. Katie Hobbs
For example, it doesn't include Congress' decision to provide a deduction for interest paid on the purchase of new cars built in the United States, something Hobbs incorporated into her plan.
Instead, it includes increases in credits and deductions for childcare.
As the stalemate continues, taxpayers must decide whether to file now — and pretty much be certain they will need to file an amended return — or wait until Hobbs and lawmakers reach a compromise, something that may not happen before those returns are due.
"They have no idea what to do now,'' said Chandler Republican Sen. J.D. Mesnard of tax filers. "Until we get a bill up and signed, that lack of certainty, that confusion, is going to continue.''
"This whole drama scenario was avoidable,'' Mesnard said.
He pointed out that Hobbs has known what's in the Big Beautiful Bill for months. He said if she had a plan that differed from the cuts in the federal law, she could have called state lawmakers into special session last fall, starting negotiations and, presumably, having a resolution before the Department of Revenue started sending out the tax forms.
There was no immediate response from the Governor's Office to questions about not calling such a special session, nor to queries about the actions of the Department of Revenue, which is run by Rob Woods, who answers to the governor.
But Tempe Democratic Sen. Mitzi Epstein said a special session last year to deal with just tax cuts would not have solved anything.
She said it is wrong to debate reducing tax collections — possibly up to $440 million a year — until the state figures out how much it needs to provide state services for the coming budget year, such as education and prisons. That has not yet happened.
And she said that doesn't include the money already promised for major road projects, including widening Interstate 10 and improvements on the heavily traveled State Route 347 between Chandler and Casa Grande.
Mesnard sniffed at the argument that the state budget should come first. He said it has been years since the state adopted a budget before April 15, meaning that even if GOP lawmakers agreed to a budget-first scenario, taxpayers still would be filing returns that would have to be amended after a deal was reached.
