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After weeks of stops and starts and negotiations with GOP objectors, Senate Republicans passed a budget and massive income tax cut, while House Democrats were able to delay the vote in their chamber by exiting the Capitol to make sure there was no quorum .
The Senate passed all budget laws, almost all with 16 to 14 party line votes, throughout Tuesday and into the wee hours of Wednesday. The House of Representatives will meet again on Thursday and appears ready to approve the roughly $ 12.8 billion budget as well.
A proposed compromise put an end to Reps David Cook and Senator Paul Boyer’s opposition to the budget by reducing – at least temporarily – a massive income tax cut and increasing the proportion of state income tax revenue that cities and towns receive. Boyer, R-Glendale, and Cook, R-Globe, had withheld their votes on the size of the tax cut and the projected loss of revenue for the communities.
On the Senate side, Senator Kelly Townsend, R-Mesa, withdrew her threat to vote against the budget pending lawmakers’ scrutiny of the vote on Proposition 208, a 3.5% high earners surcharge that voters approved in November.
The original budget included a flat income tax rate of 2.5% to replace the current tiered tax rates, which range between 2.59% and 4.5%. To partially offset the new 3.5% surcharge from Proposition 208 for individuals making at least a quarter of a million dollars a year and couples making at least half a million dollars, the plan would cap income tax rates to 4.5%, which means that high earners get the new bonus plus 1% in addition.
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The flat tax rate is expected to cost up to $ 1.9 billion in tax revenue by fiscal year 2025 when fully implemented. The League of Arizona Cities and Towns estimates the cost to the communities at more than $ 285 million. Boyer and Cook resisted the budget mainly over concerns about lost revenue from both state and cities, saying they wanted a smaller tax cut and city compensation.
The compromise presented on Tuesday provides that the share of cities in state income tax revenue will increase from 15 to 18 percent. Legislative leadership had previously proposed 17%, which Boyer, Cook and the League all opposed.
And the flat rate of 2.5% would be increased to two rates of 2.55% for those earning up to $ 27,272 a year and 2.98% for income above that. If government revenue numbers hit certain triggers – critics say the tax cut proposal is too dependent on rosy revenue forecasts and one-off federal dollars – the 2.5% rate would eventually be phased in.
These changes were enough to get Boyer and Cook on board and shift the League of Arizona Cities and Towns from an antithesis to a neutral budget.
“There is no denying that this is a very important law. I would call it a one-time revision of our tax law, ”said Senator JD Mesnard, R-Chandler, one of the lead architects of the tax cut package.
The Senate Democrats criticized the tax cut as a giveaway for the rich, noting that the richest Arizonans will reap the greatest benefits. They wondered why lawmakers would turn down the opportunity to use the profits from the state’s budget surplus for priorities like K-12 education. And they warned that lawmakers and voters would regret the decision in the years to come if the tax cuts robbed the state of the revenue it needed.
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“We have a golden opportunity with the amount of funding we received not only from the federal government, but also from the meager budget we passed last year and the increased revenue that came from this recent pandemic,” said Senator Tony Navarrete, D-Phoenix. “And we’ll just give it away and hand it over to the top 1% of earners.”
Senator Kirsten Engel, D-Tucson, said she was “appalled” that the Senate is approving the massive cuts she believes would spark a budget crisis like the one Kansas experienced after a massive tax cut package in 2012 led to years of budget cuts and Budget problems and ultimately forcing GOP lawmakers to lift many of the cuts later.
“We will deprive ourselves of the revenue to solve problems we have in the state. It destroyed the whole idea of progressive taxation, which is based on a very solid foundation that the first dollar is the most important dollar to you. When you get more dollars, they don’t mean quite that much. And it turns the idea of justice in our tax system completely upside down, ”said Engel.
Mesnard defended the tax cut package from democratic criticism. While the Democrats argued that the cuts would primarily benefit the rich, Mesnard noted that wealthier Arizonans provide most of the state’s income tax revenue, which he believes would continue to run at the new, lower rates, while continuing a tax cut for every Arizonan would be granted.
And while Senate minority leader Rebecca Rios warned that the lost tax revenue would bring a return to the kind of fiscal crisis the state experienced during the Great Recession in 2009, Mesnard predicted that it would bring economic growth and attract people to Arizona .
“Every single taxpayer in Arizona gets a cut. Every single one. And the rich will still pay most of the taxes in this state. We’re just going to have a much friendlier tax environment than where we are now. And if we have future surpluses as a result of that decision, today we remember that moment when we were demonized for what we do, ”Mesnard said.
In the House of Representatives, Majority Leader Ben Toma, R-Peoria, said he believed the budget had the votes to pass. But the vote will have to wait after the House Democrats were able to deny the Chamber a quorum by exiting the Capitol and taking advantage of the absence of four Republican lawmakers.
Dems delay the House of Representatives budget vote while questions remain in the Senate
Legislators are allowed to vote remotely, a concession both chambers made in response to the COVID-19 pandemic. But Toma said House attorneys concluded that the Arizona Constitution requires 31 members to be present in person to reach a quorum. GOP MPs John Fillmore, Travis Grantham, Frank Pratt and Bret Roberts attended from afar, and 28 of the chamber’s 29 Democratic members – minority leader Reginald Bolding was the only exception – left the building.
Bolding, R-Phoenix, said lawmakers need more time to analyze the proposed changes, which were introduced Tuesday morning, and said the budget was drawn up without input from the Democratic Group, which holds 29 of the 60 seats in the House of Representatives .
Earlier in the day, Governor Doug Ducey said he was optimistic that the budget would have enough support to pass.
“We intend to adopt a budget. We have presented a budget that we believe has a lot in itself for everyone. It’s an incredible budget in terms of investing in K-12 education, infrastructure, water infrastructure, social safety net, etc., ”Ducey told reporters.
The Senate did not respond to the consideration of Prop. 208 that Townsend had requested. But GOP senators approved a multitude of electoral law changes, many of which appear to have been inspired by the baseless allegations of electoral fraud and conspiracy theories falsely promoted by former President Donald Trump and many of his supporters by claiming that the 2020 general election had been rigged. President Joe Biden won Arizona with 10,457 points, making it the first Democratic presidential candidate since 1996 to win the traditionally conservative state’s vote.
Changes the Senate approved included requirements that ballot papers contain anti-fraud features such as watermarks, holographic film, and specialty inks; a task force to determine whether social media platforms are unfairly obstructing Republican candidates and whether such alleged practices are unreported in-kind benefits; Analysis of voters who are excluded from voting in state elections because they cannot present proof of citizenship but are still entitled to vote for federal candidates; and the establishment of a special legislative committee to review the results of the self-proclaimed electoral test Senate President Karen Fann ordered to review the general election in Maricopa County.
GOP senators also approved an amendment that restricts governors’ ability to make emergency statements, a response to Ducey’s emergency statement regarding the COVID-19 outbreak.