The Arizona House of Representatives will take another shot at passing a budget on Monday, including a massive income tax cut, but it still doesn’t appear to have enough support to pass.
Both legislative chambers paused last week, ostensibly until June 10, after failing to muster enough Republican votes to pass the $12.8 billion budget plan. In response, Gov. Doug Ducey announced that he won’t sign any legislation until he receives a budget, and vetoed 22 unrelated bills to back up his threat.
The House is now scheduled to convene at 9 a.m. on Monday, and all 11 budget bills are on the calendar.
House Majority Leader Ben Toma, R-Peoria, said legislative leadership is amending the budget bills, in some cases making significant changes — but it’s unclear whether it will be enough to bring the holdouts on board.
“I’m not sure that we have all the votes completely wrapped up yet, but it’s time for us to do our constitutional duty and actually put them on the board. And for those members who feel that it’s not good enough, they’re going to need to explain why it’s not good enough, to their constituents and pretty much everyone else,” Toma said.
As of Friday, the budget didn’t have the unanimous support from House Republicans that it needs to pass.
Rep. David Cook, R-Globe, told the Arizona Mirror that he’s still opposed to the budget due to the massive income tax cuts it includes. The proposal would replace Arizona’s graduated income tax brackets with a flat 2.5% rate. Individuals who earn at least $250,000 per year and are subject to an additional 3.5% surcharge that voters approved in November would pay 4.5%, getting a lower underlying rate to offset the effect of Proposition 208.
Cook has a number of concerns about the budget, chiefly revolving around the proposed tax cuts. He’s worried about the substantial revenue loss from the tax cuts, which would cost the state upwards of $1.9 billion per year in fiscal year 2024, when they’re fully phased in. He said he would support as much as $500 million in cuts.
He’s also concerned about the revenue that cities and towns would lose. Due to Arizona’s state-shared revenue system that provides cities with a portion of the state’s tax revenue in exchange for barring them from imposing their own income taxes, any state tax cut would pull revenue from municipalities. The League of Arizona Cities and Towns estimates that the current proposal would cost cities a combined $285 million annually.
“At this point, I remain opposed to the budget proposal introduced by House leadership. I am hopeful that changes can be made to address my concerns including the negative impact to cities and towns, ongoing debt, unfunded pension liabilities, capital improvement needs and investment in water infrastructure for the future expected Arizona growth,” Cook said.
Cities currently receive 15% of the state’s income tax revenue; in return, they can’t impose their own income taxes. Toma said one of the changes to the budget plan will increase that to 17%. Toma also said a pair of contentious tax credits will be pulled from the budget and run as standalone bills.
But increasing the revenue sharing to 17% isn’t enough for the League of Arizona Cities and Towns, said Nick Ponder, the group’s legislative director. Ponder said the League wants 19% to be the starting point for negotiations.
Toma said that isn’t doable.
“At this point, I don’t know if we have the votes to go above 17%,” he said.
Cook was skeptical of the proposal, noting that the legislature would be able to come back in future years and revert back to 15%, or even lower if it wanted. He also said the plans to change Arizona’s decades-old state-shared revenue formula were being rushed through.
“Shouldn’t big policy be worked on for a serious amount of time and fleshed out through committees and debate? It should be done in a significant amount of time so we make sure we have the best policy in front of us at the finished product,” Cook said.
While Republicans such as Cook and Sen. Paul Boyer, R-Glendale, have taken aim at the tax cuts package, others say the budget package simply spends too much and they want to see it pared down. For example, Rep. Judy Burges, R-Skull Valley, sent out an email earlier this week criticizing House Speaker Rusty Bowers and the “twelve-billion-dollar pork-laden budget.”
The Senate has no plans yet to return. Mike Philipsen, a spokesman for the Senate Republican caucus, said the chamber’s leadership will wait to see what happens in the House.