Arizona House approves bill adjusting income tax brackets yearly for inflation

Economic Indicators Associated Press

The Arizona Senate on Monday joined the House in passing a bill that adjusts tax brackets every year to account for inflation, despite a large state budget deficit.

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A one-time adjustment was enacted last year, but Republican Gov. Doug Ducey, who took office this year, asked the Legislature to send him a bill making the adjustment automatic each year.

Estimates by the Legislature's analysts show Senate Bill 1088 and a companion House bill are expected to cut income tax collections by $14.5 million next year, and more in each subsequent year.

That brought pushback from Senate Democrats, who opposed the measure because of the increasing cuts to revenue.

"Any tax cut we pass will continue to take money from our general fund," said Sen. Andrea Dalessandro, of Tucson. "Any tax cut we make will prevent us from spending money on our much needed infrastructure and out public school system, from kindergarten to university."

Republicans called the bill an effort to ensure fairness for taxpayers who get small raises to keep up with inflation that push them into a higher tax bracket.

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"And I would contend that if the middle class has more money in their pockets, that they may spend more maybe on those cars and refrigerators and then the sales tax ... will raise as well and help everyone," said Sen. Debbie Lesko, R-Peoria.

The Senate vote was 18-11, with only one Democrat supporting the bill, Sen. Barbara McGuire, of Kearny.

The proposal has been championed for the past three years by Rep. Justin Olson, R-Mesa. The House passed identical legislation, House Bill 2001, last week.

The proposal will head to Ducey once the two chambers exchange bills.

Olson pushed similar legislation two years ago that was vetoed by then-Gov. Jan Brewer. Brewer said it would have cost the state $11 million in revenue and should not be automatic each year. She recommended adjustments after reviewing the budget each year. Olson then pushed a bill last year for a one-time adjustment, and Brewer signed it.