A massive Arizona income tax cut that mainly benefits the wealthy championed by GOP Gov. Doug Ducey and enacted by Republicans who control the state Legislature in 2021 will go into full effect ahead of schedule next year, Ducey’s office announced Thursday.
The plan will save taxpayers about $1.9 billion next year compared to before the plan was enacted, although the vast majority of those cuts go to high-earning Arizonans. The cuts started at $1.5 billion this tax year and were to be phased in once the state met revenue targets, which came a year before projections.
The flat tax plan eliminates the state’s old graduated income tax scale, which started at 2.59% and had a maximum tax of 4.5% for income over $159,000 a year for a single person. All taxpayers will now pay a maximum of 2.5%.
Ducey says the average family will save $350 a year, but the Legislature’s budget analysts put that figure much lower. Meanwhile, high-earning Arizonans will see huge benefits.
“These tax cut overwhelmingly benefit the richest Arizonans and do very little for middle- or low-income Arizonans,” said David Lujan, President and CEO of the Children’s Action Alliance, a lobbying group that advocates for child welfare and education issues.
"If you’re making over half a million dollars a year, you get an average tax cut of over $16,000 annually,” Lujan said. “A household with $70,000 a year gets a $58 annual tax cut.”
Ducey has mainly waived off the inequities in who benefits from the measure he signed last year, instead trumpeting the effects on the state’s economy,
“This tax relief keeps Arizona competitive and preserves our reputation as a jobs magnet and generator of opportunity,” he said in a statement.
Opponents of last year’s tax cut package, mainly backers of public education, collected enough signatures to block it from taking effect until a vote in November’s election. But the state Supreme Court halted that effort in April, agreeing with business groups that tax legislation is not subject to the voter referendum process in the state constitution.