An economist from a conservative policy organization that produces model legislation for states is urging Arizona to pass the savings from last year’s federal tax cut legislation on to taxpayers, echoing calls from some Republican state lawmakers who want a lame-duck special session next month.
In an op-ed in the Washington Times on Tuesday, Jonathan Williams, the chief economist at the American Legislative Exchange Council, wrote that Gov. Doug Ducey and Republican lawmakers should conform Arizona’s tax code with the federal Tax Cuts and Jobs Act. Williams wrote that Arizona should use the extra revenue that would generate to cut other taxes, as several other states have done.
“The untold story of federal tax reform is the golden opportunity it has provided policymakers in our 50 laboratories of democracy and innovation. Only time will tell, but Arizona has a real chance to boost its already solid economic outlook and stay competitive with the many states that have already taken advantage of the federal windfall,” Williams wrote. “Absent tax reform, Arizona faces the threat of falling behind in the race for economic competitiveness in an extremely competitive region, simply by standing still.”
Fully conforming Arizona’s income tax code with the Tax Cuts and Jobs Act would eliminate a host of deductions and exemptions, which would result in individual taxpayers paying between $174 million and $228 million more in Arizona taxes this fiscal year.
Some Republican lawmakers, including House Speaker J.D. Mesnard, R-Chandler, want to pass a conformity bill that won’t increase Arizonans’ taxes. Mesnard said there are numerous ways the state could offset the potential loss of those deductions.
Mesnard and others, including Speaker-elect Rusty Bowers, R-Mesa, want Ducey to call a special session before the end of the year. They say taxpayers and the Arizona Department of Revenue need guidance as soon as possible.
Democrats could oppose a conformity bill that doesn’t shift that new tax revenue to the state’s coffers, which would make the Republicans’ plans more difficult when the new Legislature convenes in January, given that the GOP’s advantage in the Arizona House of Representatives will shrink to just 31-29. Williams wrote that “the clock might be ticking” due to the newly elected legislators.
Ducey has vowed to never raise taxes, which makes it seem unlikely that he’ll push for the state to eliminate the income tax deductions and keep the revenue. But he said tax conformity can likely wait until the Legislature convenes in January for the 2019 session.
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