Photo by Jerod MacDonald-Evoy | Arizona Mirror
The Arizona House of Representatives passed large swaths of the state budget package Thursday, including a sweeping tax plan, a prohibition on COVID-19 vaccination requirements in public universities and rules for printing ballots with watermarks and holographic foil as “anti-fraud measures.”
But the House ended its work shortly before 11 p.m., before it could take up a series of dramatic changes for K-12 education, including a massive expansion of the state’s school voucher program that was slipped into the budget plan at the last moment after failing to win legislative support earlier this year. Lawmakers will return to work Friday morning to finish debating and voting on the budget, which was approved Tuesday by the state Senate.
Under the tax plan adopted by both chambers, Arizona will shift to two income tax rates: 2.55% for people who earn $27,272 annually and 2.98% for those who earn more than that. Legislative budget analysts estimate those cuts will cost the state about $1 billion in revenue.
And if state tax revenues hit certain thresholds over the next few years — $12.8 billion in 2022 and $13 billion in 2023 and subsequent years — lower rates will phase in, ultimately hitting the 2.5% flat rate that was initially proposed. The earliest that can happen is 2023.
“What we do have here is a historic tax cut that will result in significant positive impact for everyone, everyone in this state. It’s a tax cut that helps small businesses and it helps make us more competitive as a state, relative to our neighbors,” said House Majority Leader Ben Toma, R-Peoria, one of the chief architects of the tax cut package. “My goal has always been … to make it easier to do business and to live in Arizona, and that’s exactly what we are doing here today.”
The Joint Legislative Budget Committee hasn’t yet released its analysis of how the revised income tax plan will affect Arizonans. But the Arizona Center for Economic Progress, a liberal advocacy group that opposes the tax law changes, said Thursday that its analysis found the median household would receive a mere $15 tax cut, while 80% of Arizonans would receive an average tax cut of less than $75. The wealthiest Arizonans would see nearly $21,000 in savings, on average.
— AZ Economic Progress (@AzEconCenter) June 18, 2021
Voting with the rest of his Republican colleagues on the tax plan was Rep. David Cook, of Globe, who had opposed the budget for weeks over concerns about the size of the tax cut and the subsequent funding decrease to cities and towns, which get a share of state income tax revenue. Cook’s opposition to the budget deprived Republicans, who only have a one-vote majority in each legislative chamber, of the 31 votes they needed to pass the budget.
The original budget plan called for a flat income tax rate of 2.5% to replace the graduated rates ranging from 2.59% to 4.5%, which would have cost the state as much as $1.9 billion. It also capped income taxes at 4.5% to offset the new 3.5% surcharge that voters imposed on wealthier Arizonans who earn at least $250,000 per year. That tax on the wealthy, approved last year as Proposition 208, is dedicated to increasing teacher pay and funding public schools.
The compromise that GOP legislative leaders reached with Cook and Sen. Paul Boyer, the Republican holdout who had been blocking passage of the budget in the Senate, reduced the size of the income tax cut — at least temporarily — and increased the amount of state income tax revenue that municipalities receive from the state.
Gov. Doug Ducey said he’s eager to sign the tax plan, which he also called historic.
“Every Arizonan — no matter how much they make — wins with this legislation. They will get to keep more of the money they earn under this tax plan,” Ducey said in a statement.
The new tax measures would mean that those who have a taxable income above $500,000 would pay at least 40% less in state taxes, while those who make between $30,000 and $70,000 would owe the state between 4% to 9% less in taxes, according to legislative analysis.
Democrats argued that the legislature should use its massive budget surplus to fund K-12 education and other needs. They accused their Republican counterparts of being reckless by depriving the state of so much revenue, and said part of the state’s surplus was based on one-time federal COVID relief money.
And Democrats noted that wealthy Arizonans would be the biggest beneficiaries of the tax cut, which they called a giveaway to the rich.
“It’s obviously a regressive plan, and in my opinion it ignores the needs of our state,” said Rep. Pamela Powers-Hannley, D-Tucson. “The person at the bottom can’t even buy a cup of coffee, except maybe at Circle K. But the person making $500,000 can buy a new car every year with this tax plan.”
Rep. Jake Hoffman, R-Queen Creek, said the tax cuts would help alleviate the economic disruptions that many Arizonans suffered over the past year as a result of the COVID-19 pandemic.
“Having a multibillion dollar surplus isn’t something to celebrate. It means we’re overtaxing our people,” Hoffman said. “It’s time that we give the people their money back.”
Democrats also objected to the provision of the tax plan that gives an extra break to individuals who earn more than $250,000 per year and couples who earn more than $500,000.
“It’s really a slap in the face to all the voters who voted for Prop. 208,” said Rep. Judy Schwiebert, D-Phoenix.
But while the tax plan partially offsets the effects of Prop. 208 on wealthier Arizonans, Rep. Jeff Weninger, R-Chandler, noted that the money from that initiative will still go to K-12 schools, as the voters mandated. The Voter Protection Act in the Arizona Constitution bars lawmakers from repealing or substantively changing voter-approved laws. The budget calls for part of the surplus to be used to directly pay the Prop. 208 costs from the state’s general fund, instead of having wealthy taxpayers foot the bill.
“The money’s still there,” Weninger said. “Nothing has changed.”
During Thursday’s budget talks in the House, members of the minority party not only criticized some of the appropriations and policy pieces passed by Republicans, but they also highlighted what isn’t in the budget. Democrats, through amendments that consistently failed on party lines, tried to add funding for full day kindergarten, for roads on tribal lands and to expand eligibility to children health insurance programs.
Democrats also repeatedly highlighted that while Arizona’s constitution requires that legislation include only one subject.
Rep. Charlene Fernandez, D-Yuma, said there’s an unusual amount of policy items that failed to win legislative approval earlier in the session that have been tacked onto budget policy bills that are unrelated to implementing the budget.
“Being here seven years, I never really experienced that,” Fernandez said. “I think it’s never been so prevalent as it is this time”
Republicans limit debate in retaliation
Before it took up the budget bills, the House started its day with a rule change to limit debate, which House Speaker Rusty Bowers said was a response to Democratic lawmakers leaving the Capitol on Tuesday to delay passage of the budget by denying a quorum.
“We met earlier this week to again perform the duties of the citizens … of the state of Arizona. It was clear then by the absence of an entire caucus and by actions prior and currently today that procedural obstruction and delay have been instituted in lieu of civility,” said Bowers, a Mesa Republican.
The biggest change limited discussion of bills in what’s known as Committee of the Whole, where lawmakers debate and amend legislation before it goes up for a final vote. Normally, that process has no time limit, and sometimes individual bills are debated for hours as amendments are considered. Democrats often introduce amendments and debate them at length to draw attention to issues, knowing that the amendments lack the Republican support they’d need to pass. But House Republicans on Thursday limited consideration of each bill to just 30 minutes.
Democrats were livid.
“This is what I want you to know, Arizona. They’re not silencing my voice. … They’re silencing your voice, Arizona. Each one of us represents a quarter million of you. And we’re going to stay here and fight with everything we have, even if autocratic decisions try to shut us down,” said Rep. Jennifer Longdon, D-Phoenix.
Fernandez called the rule change petty retaliation.
“To limit us right now is criminal. It’s a crime against the voters of Arizona. They deserve to know what is happening in the dark of night, behind closed doors. And the worst part is we’re left to explain, but even we’re left out,” Fernandez said.
Republican Rep. Travis Grantham, the speaker pro tem of the House, said he was one of the people behind the rule change. He said House Republicans decided against a proposal to shorten the amount of time lawmakers have to speak. But he defended the limitations they imposed on Thursday.
“We are not preventing members from debating. What we are preventing today is an endless obstruction that would ultimately result in the shutdown of the state of Arizona,” said Grantham, a Gilbert Republican.
Rep. Bret Roberts, R-Maricopa, said the Democrats’ umbrage over the rule change wasn’t about wanting more debate, but was about pandering to their political base.
“In reality what this is truly, really about is people want their three minutes of fame, they want to get the video, they want to do this, because how many members are running for something else at this point?” Roberts said.
New budget provisions
One of the proposals that Republicans passed that was debated on was House Bill 2893, which contained criminal justice policy changes. One GOP-backed amendment gives any state lawmakers the power to request an state Attorney General investigation on an official action taken by a county, city or town in Arizona if the legislator believes it violates the state constitution.
Another provision of HB2893 sharply limits how the Department of Public Safety releases video recordings: It requires all people in the video to consent to the release and DPS has to determine the recording release serves “an important public purpose.” The measure also allows DPS to establish high fees for providing the recordings, which are a public record.
And the bill requires that any member of a law enforcement civilian review board in the state must be a current or former police officer, or complete training from the Arizona Peace Officer Standards and Training Board.
Rep. Reginald Bolding, D-Phoenix, criticized the measure.
“What this does is that it prevents civilians from serving on civilian review boards,” he said.
Rep. John Kavanagh, a Fountain Hills Republican and a retired police officer, said the proposal is about making sure those who serve on the board have an understanding of the law enforcement profession.
“We are not going to throw cops into a pit with a bunch of villains who are anti-police,” he said. “I’m protecting cops, and I’m keeping balance on these boards.”
Among other provisions added to the budget are requirements that ballots contain anti-fraud features such as watermarks, holographic foil and specialized inks; a task force to determine whether social media platforms are unfairly hindering Republican candidates, and whether such alleged practices constitute unreported in-kind contributions; analysis of voters who are barred from casting ballots in state races because they can’t provide proof of citizenship but are still permitted under federal to vote for federal candidates; and the establishment of a special legislative committee to review the findings of the self-styled election audit that Senate President Karen Fann ordered to review the general election in Maricopa County.
Hoffman called the election measures “the civil rights issue of our time.”
Fernandez had a different name for the proposals: “The sore loser bill,” referring to the number of conspiracy theories surrounding President Joe Biden’s victory in November that state legislators have used as fodder to push changes to voting and elections.
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