PHOENIX β One of the stateβs three Republican legislative leaders has vowed he wonβt let the Trump tax cuts have a negative ripple effect on Arizona taxpayers.
House Speaker J.D. Mesnard acknowledged that the linkage between federal tax laws and the state tax code means that what is in the federal law affects the deductions that Arizonans are allowed to take when computing their state income taxes. The state Department of Revenue figures those changes would automatically take an extra $250 million a year out of the pockets of individual and business taxpayers.
Mesnard said he will push for changes in Arizona tax laws to keep that from happening.
βNot doing so would trigger an automatic increase in state income taxes on Arizonans, which is unacceptable,β he said. βThe federal tax reform was meant to be a windfall for taxpayers, not state government.β
Gov. Doug Ducey has not made a similar pronouncement, though spokesman Daniel Scarpinato said his proposed $10.1 billion spending plan, released Friday, does not count on the extra dollars.
There has been no comment from Senate President Steve Yarbrough.
But Sen. Steve Farley, D-Tucson, said GOP lawmakers should not be so quick to forgo the additional dollars. He said the state should see whether thereβs a way to take advantage of the changes in federal law, but do it in a way he believes is fair.
Unlike some states, Arizona requires its taxpayers to use the federal adjusted gross income as a starting point for determining an individualβs state taxable income. What Congress approved last month eliminates some deductions. So the federal adjusted gross income is higher.
More complex is that Arizona law generally links what Arizonans can deduct from their starting point state income to what federal law permits. The new changes from Washington eliminate some entirely, like writing off the value of property destroyed by fire or stolen, and places limits on some others.
Farley, who is running for governor in this yearβs election, said the state should seriously think about keeping the extra money that would flow to Arizona from corporations due to the federal tax-law changes. He said they are the big winners in the federal tax changes.
βWe should be accessing that money to help mitigate the damage thatβs being done by the federal tax bill,β Farley said. He cited figures that show half of all teacher vacancies this year are being filled by people who do not have regular teaching credentials.
βWeβve got a crisis that we need to fund,β he said. βIf we could put that money into teacher raises, that would help a great deal.β
Most of the impact of the federal tax changes on Arizona taxes, however, would affect individuals. Farley said that presents a different problem.
βWeβre going to have to pick and choose and make sure that none of these increases negatively affect working families or poor families,β he said. But the story is different for those in the top income brackets.
βThey should have to pay for it because theyβre going to be getting this relief from the federal tax bill thatβs going to go out to the 90th percentile and above,β he said.
