By BOB CHRISTIE – Associated Press
PHOENIX (AP) – Republican Arizona lawmakers who passed an income tax cut of nearly $ 2 billion in the last session are seeking to repeal it and replace it with a new version , a decision that would end an electoral referendum that ended the tax reduction law. to take effect.
The recognition of Representative Ben Toma and Senator JD Mesnard, the main architects of the flat tax proposal and bills that circumvent a tax on the wealthy that voters approved in 2020, comes a week after a judge ruled rejected a referendum challenge.
And it’s not just the referendum itself, which suspended the $ 1.9 billion income tax cut for the Republican-controlled legislature, that is the problem. Toma noted that passing his flat tax proposal involved a series of deals to rally other Republicans.
This includes an increase in the amount of income taxes sent to cities from 15% to 18% currently, a deal designed to protect these governments from cuts in state revenues. The cities would get a big windfall if the tax cuts were removed.
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“It was really, in every way, a budget talk,” Toma said this week. “In fact, it was the budget conversation. It was the only thing that needed to be resolved in order to get a budget this year.
On the table, a possible full repeal and replacement of tax cuts, which will be phased in when revenue targets are met, starting at $ 1.3 billion this year, Toma and Mesnard said.
When fully implemented, the plan would reduce the tax rates of most taxpayers to 2.5%, from a range of 2.59% to 4.5% and reduce government revenue. $ 1.9 billion. Wealthy taxpayers would also be spared from the tax hike approved by voters in 2020 to increase funding for schools.
The tax cuts mainly benefit the rich. According to Legislative Budget analysts, the average taxpayer earning between $ 75,000 and $ 100,000 will save $ 231 per year in state income taxes, while the average taxpayer earning between $ 500,000 and $ 1 million. dollars per year will save over $ 12,000. And the bills creating big exemptions from Proposition 208 are saving hundreds of millions of the rich.
Groups that put Proposition 208 on the 2020 ballot to increase funding for schools have been enraged by tax cuts and workarounds to the High Income Initiative’s 3.5% surtax.
In August, the state’s Supreme Court declared a key part of Proposition 208 unconstitutional and said it had to be overturned entirely if a lower court ruled that the new revenues put schools above a benchmark. spending limit approved by voters. This is likely, as schools already face this limit.
After the state’s $ 12.8 budget was passed in June, they scrambled to collect enough signatures to block the tax cuts and the two revenue-reducing bills in Proposition 208. They didn’t ‘only succeeded in blocking the big income tax cuts.
Opponents of tax cuts argue that Arizona’s underfunded schools and social programs need the money more than the rich. They had to file more than 118,000 valid signatures to block the tac cut law and place it on the November 2022 ballot. The secretary of state’s office said after its reviews and county officials, about 163 000 were valid. It was certified in November and could appear on the ballot as Proposition 307 in November 2022.
The group, Invest in Arizona Now, has so far pushed back a court challenge to the referendum by trying to repeal the tax cuts included in the Senate Bill 1828. A judge last week rejected the arguments of Arizona Free Enterprise Club that the state constitution does not allow it. tax reduction laws be sent to the polls. This decision is appealed to the State Supreme Court.
David Lujan, who heads the Children’s Action Alliance which was part of the coalition supporting the referendum, said voters would not be happy if the legislature repeals and replaces the tax cuts and avoids the referendum.
“I would say I would proceed with extreme caution if I were a lawmaker inclined to support something like this, as polls show Arizona voters overwhelmingly support this referendum,” Lujan said Thursday.
Mesnard said the combination of the referendum blocking income tax cuts and the Supreme Court’s ruling on Proposition 208 will force GOP lawmakers to act. No Democrats have supported the tax cuts.
“So given these two factors, my suggestion would be to repeal it,” Mesnard said. “Take a look at the new landscape, publish the court decision and adopt a different tax package. “
State revenues continue to soar, with a huge surplus approaching $ 2 billion, even as the $ 1.9 billion tax cuts take effect, Toma said.
“A full repeal and replacement of the tax cut is on the table,” Toma said. “Our incomes are significantly different in a good way from what they were even when we passed this bill.
“And a cleaner bill that reflects the reality of where we are, I think that’s also a potential option,” he said.
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