Ducey’s budget omits tax conformity issue

By Jeremy Duda | Arizona Mirror

The question of what Arizona will do with the new revenue it gets by conforming with the federal income tax code, which is shaping up to be one of the most contentious issues of the 2019 legislative session, is a blank space in Gov. Doug Ducey’s executive budget plan.

Arizona is one of 38 states that conforms its income tax code to the federal tax law. Because of the federal tax cut and reform package of late 2017, conformity would eliminate a host of itemized deductions, which would generate somewhere between $174 million and $228 million in new state revenue.

Daniel Scarpinato, the governor’s chief of staff, said Ducey is committed to conformity. But the budget doesn’t include any mention of what the governor plans to do with the money.

The Ducey administration has in the past proposed using the first year of revenue from conformity, which would cover the 2018 tax year, to bolster the state’s rainy day fund. Ducey’s budget plan calls for an increase of the fund to $1 billion, and there could be room for more if the legislature approves a bill to allow the state to keep up to 10 percent of general fund revenues in reserve.

“If there’s an opportunity to put additional dollars in the rainy day fund beyond what we have presented here as part of this budget, we are very open to that discussion,” Scarpinato said.

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