The Arizona income-tax plan morphed, but the goal stayed the same: Across-the-board cuts

By Mary Jo Pitzl | Arizona Republic

The Legislature is halfway toward a makeover of the state’s income tax, collapsing five brackets into two and, ultimately, settling on a 2.5% rate for most taxpayers.

The $1.01 billion in individual income-tax cuts would rank as the largest in state history, according to legislative budget analysts. The reductions are part of a $12.8 billion budget package that the state Senate approved Tuesday and that the House is scheduled to take up Thursday.

The so-called flat tax has morphed since GOP legislative leaders and Gov. Doug Ducey presented it more than a month ago. Changes made to win the support of holdout lawmakers have carved $500 million off the original $1.5 billion price tag.

But the intent remains essentially the same: lower rates for all and a buffer for higher-income earners who must pay a 3.5% surcharge to fund education on adjusted taxable income above $250,000.

Savings would range from less than $10 for taxpayers with taxable incomes below $25,000 to $96 for taxable incomes up to $75,000 to as much as $350,000 for those with taxable incomes of $5 million, according to state budget estimates. 

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