It’s Tax Day. For many, it’s a day that approaches with a sense of dread. But in Arizona this April 15, let’s take a minute to acknowledge the good things we’re doing to foster a better tax environment.
1) Tax reforms you can set your watch to. Governor Ducey and legislative leaders made clear early on in the 2015 legislative session that the tax reforms included in the 2011 and 2012 competitiveness packages would continue to be implemented without pause. That means the corporate income tax rate phase down from 6.9 percent to 4.9 percent, the business property tax relief, and the 25 percent reduction in the capital gains tax will continue to come online on schedule, giving Arizona job creators and taxpayers the certainty they need.
2) Avoiding backdoor tax increases. The governor in his State of the State address called for Arizona’s tax brackets to be pegged to inflation and he made it a priority agenda item for his first legislative session. An Arizonan who earns a modest raise shouldn’t see that extra dough evaporate due to a rising cost of living and because they’ve been bumped into a higher tax bracket. The Legislature, thanks to the leadership of Rep. Justin Olson, who has made this issue a priority for several sessions, responded to the governor’s call and sent him a bill to make this commonsense reform, putting Arizona in the company of 23 other states that index their tax brackets to inflation.
3) Putting downward pressure on insurance premiums. Speaking of dogged legislators, House Majority Whip David Livingston was successful in his push to send to the governor legislation that reduces the state’s insurance premium tax. Reducing this gross receipts tax insurers pay has been a priority for the Arizona Chamber for several years, and there was strong bipartisan support in the Legislature this year to pass this bill that phases down the tax from 2 percent to 1.7 percent over the next decade. We were thrilled that Gov. Ducey signed the bill into law, improving our insurance environment and even putting some downward pressure on premiums.
4) An expensing policy that encourages investment. Thanks to passage of S.B. 1188, job creators can make large capital investments in machinery and equipment and expense up to $500,000. This is smart tax policy that encourages investment as businesses can realize the depreciation in equipment more quickly.
On Capitol Hill, it’s not unusual for Congress to dawdle until the last minute to extend federal expensing provisions every year. In Arizona, if the governor and Legislature would have failed to pass this bill, many Arizona taxpayers who were operating under the assumption that the state expensing policy would continue would have been forced to amend their tax returns, and Arizona would find itself on a very small list of states not offering accelerated first year expensing. Gov. Ducey – whose budget proposal always assumed that this policy would continue – and the Legislature deserve credit for acting to avert a potential new burden on taxpayers.
Passage of the bill also conformed state law to several other federal tax provisions, such as permitting up to $250 worth of deductions for teachers’ classroom expenses, the deduction of certain tuition related expenses, and the deduction of mortgage insurance premiums.
Even for those of us who got a tax refund this year, filing taxes is rarely an enjoyable exercise. It’s nice to know Arizona’s leaders are working to help us keep some additional dollars in our pockets.
