Gov. Doug Ducey, who initially campaigned for governor in 2014 on a platform to reduce income tax rates to “as close to zero as possible,” a goal that has eluded him for years, announced in January that he plans to pass $600 billion in income tax cuts in the 2021 legislative session.
By Jeremy Duda | Arizona Mirror
Republican lawmakers and Gov. Doug Ducey aren’t changing their plans for big tax cuts this year, despite a provision of the latest federal COVID relief bill seeking to block states from using the money to fund tax reductions.
Meanwhile, Arizona Attorney General Mark Brnovich is preparing for possible litigation on the issue. Ryan Anderson, a spokesman for Brnovich, said the AG believes it’s unclear whether the relief package would preempt the governor and legislature’s plans. Brnovich is one of 21 GOP attorneys general who signed a letter to U.S. Treasury Secretary Janet Yellen declaring the provision an “unprecedented and unconstitutional infringement on the separate sovereignty of the States.”
Arizona state government will receive at least $12.2 billion from the American Rescue Plan Act, according to an analysis by the Joint Legislative Budget Committee. But that money comes with some strings attached, one of which is that recipients cannot use it “to either directly or indirectly offset a reduction in the net tax revenue.” That prohibition includes a “reduction in a rate, a rebate, a deduction, a credit,” or a delay in the implementation of a tax increase.
That could be problematic in states like Arizona, where Republican officials have plans for big income tax cuts.