House panel OKs measure to cut Arizona taxes by $162 million

The biggest part of House Bill 2778, as approved by the Ways and Means Committee on a party-line vote, is an across-the-board cut in individual income tax rates.

By Howard Fischer | Capitol Media Services via Arizona Daily Star

Saying the state has more money than it needs, Republicans on a House panel voted Wednesday to cut state taxes by nearly $162 million this coming budget year — and an undetermined amount years down the road.

The biggest part of House Bill 2778, as approved by the Ways and Means Committee on a party-line vote, is an across-the-board cut in individual income tax rates. That move alone would reduce state revenues by $100 million a year.

The benefits to individual taxpayers would vary.

Another provision would give businesses the ability to write off more rapidly the depreciation of equipment they buy, giving them an additional income tax deduction.

The one that could have the biggest impact over the long term, however, is to increase the amount that individuals who do not file itemized tax returns can still deduct in charitable contributions from the amount of income that is subject to state income taxes. For the coming fiscal year, that loss to the state would be $2.1 million.

But Rep. Mitzi Epstein, D-Tempe, said the legislation would increase that allowance annually according to inflation. So the reduction in state revenues would be $4.2 million the year after next and $6.3 million the year after that. The legislative fiscal analysis does not go beyond that year.

Epstein worried that this change alone eventually could balloon to $100 million a year, money she argued is needed for Arizona to meet its needs for everything from education to aiding homeless people.

That argument did not convince Rep. Joanne Osborne, R-Goodyear.

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