Gov. Doug Ducey made clear in his State of the State address that it’s pedal to the metal to increase Arizona’s job attraction competitiveness.
Those looking to press pause on our job attraction efforts are going to be disappointed. This governor’s not going to roll back the major tax reforms we’ve instituted over the past few years.
Gov. Ducey is continually looking for more ways to ensure that our tax code says loud and clear that Arizona is open for business. For example, we agree with his stance that Arizona’s tax brackets should reflect yearly changes in the cost of living. This is a commonsense reform that will continue to enhance our competitive standing.
Rep. Justin Olson has introduced this reform in the form HB 2001. Sen. Debbie Lesko has introduced a companion bill in the Senate.
Failing to adjust income tax brackets for inflation results in a back door tax increase, as the state’s tax brackets fail to reflect taxpayers’ diminished buying power from year to year due to increased costs of living. For example, a taxpayer with a year 1 income of $50,000 and a year 2 income of $52,000 has no increase in actual wealth, as inflation eats up the income gain. Yet that fact is not reflected in the state’s income tax brackets. Arizona workers should be getting a raise, not a new higher tax bracket.
More than half the states with an income tax at least partially index their tax brackets to inflation, including California. When California has a more competitive tax policy than Arizona, we believe that presents an opportunity for reform.
Arizona prior to 1990 indexed its tax brackets; it’s time to return to that practice.
This is a priority bill for Gov. Ducey and it’s a priority bill for the Arizona Chamber. It deserves swift passage.
