Single GOP lawmaker joins Dems in defeating Ducey's flat tax in Az Legislature

House Republicans' latest effort to force through a budget fell short again as GOP Rep. David Cook continued his opposition over a massive income tax cut package, voting with his Democratic colleagues to sink the plan.

GOP leadership scheduled a vote for Monday on the budget and a slew of amendments intended to shore up support among a handful of holdouts, essentially daring Republicans to vote against it. Among the changes was an adjustment to the formula used to distribute state income tax revenue to cities and towns, which would partially offset the municipal revenue loss anticipated from the income tax cuts negotiated by House leadership and Gov. Doug Ducey.

The change, however, wasn't enough to win over Cook, who has argued that the small cities in his largely rural district can't afford the revenue losses they'll incur from the tax cut. Arizona cities are barred from enacting local income taxes, so the state instead shares a portion of its income taxes. The League of Arizona Cities and Towns estimates that the proposed income tax cuts will reduce the amount sent to cities by 31%, and will result in cuts to city services and public safety.

The Globe Republican signaled his opposition early, opening the day's debate by aggressively questioning a fellow GOP representative over whether he and other members had enough time to review the amendments, openly siding with opposition Democrats who raised similar questions.

But Cook, who debated the budget while his home in Globe was under direct threat from the Telegraph Fire and while his family received an evacuation order during the House proceedings, made it clear that his objections were primarily rooted in the substance of the tax cuts. He raised the specter of the infamous debacle in Kansas, when a massive 2012 tax cut package triggered years of budget cuts and other fiscal woes, ultimately forcing that state's Republican legislature to repeal many of the cuts.

The budget plan would replace Arizona's graduated income tax brackets with a single 2.5% rate. It also imposes a cap of 4.5% on the percentage any Arizonan would be required to pay in income taxes, which is aimed at nullifying part of the effect of Proposition 208, a measure voters approved in November to impose a 3.5% surcharge on Arizonans who earn at least $250,000 annually as individuals or $500,000 as couples. That money will go to fund public schools and increase teacher salaries.

Rather than pass or fail the amendments and the underlying bills on a voice vote, which is customary when legislative chambers hear bills in committee of the whole, Democrats called for division, meaning each individual lawmaker's vote would be recorded by counting the people standing on the chamber floor. The result was 30-30 votes on both the bill and the amendment, ensuring their defeat, as Cook sided with the Democrats.

Rather than vote on all 11 budget bills, Republican leadership pulled the plug on the day's proceedings after two. Even without enough votes to pass the budget, the day wasn't a total wash for GOP leaders, who put Cook on record voting against the two bills that would have enacted the tax cut package.

As he sparred with Majority Leader Ben Toma, one of the chief architects of the tax cut package, Cook again reiterated the short timespan he and other lawmakers had to consider such a major change. When Toma, R-Peoria, asked if he had a question, Cook replied, "Doesn't that bother you?"

"Mr. Cook, lots of things bother me. Cutting taxes isn't one of them," Toma said.

"Do you think I don't want to cut taxes?" Cook responde.

"I think we're about to find out," Toma shot back.

Cook was not swayed: "You wanted me here on record. I'm here..

After the House recessed on Monday, Cook told the Arizona Mirror that he's willing to support an income tax cut of $500 million to $600 million, similar to what Ducey proposed at the start of the legislative session.

"I don't see how that's not reasonable," said Cook, who has proposed using some of the state's surplus revenue to pay off debt.

Cook was also still skeptical of the proposal to increase the cities' share of state income tax revenue, questioning how the state will pay for that increased disbursement.

The House is set to return June 10, as is the state Senate. Whether a budget is considered when lawmakers return will hinge on if GOP leaders can find a way to mollify Cook without alienating conservative Republicans who have balked at dozens of smaller-ticket spending items in the budget and have threatened to withhold their votes, as well.

With Cook digging in his heels, House Speaker Rusty Bowers, R-Mesa, said lawmakers will go back to the drawing board. He indicated that the budget that he and Senate President Karen Fann negotiated with Ducey could see substantive changes.

If lawmakers fail to pass a budget by July 1, when the next fiscal year begins, Bowers said the governor will end up using emergency funds and would "be empowered to make a lot of decisions that many legislators have tried to come to grips with in the past, which I think would be an interesting conundrum for them," referencing some Republican legislators' opposition to the way Ducey has wielded his emergency powers throughout the COVID-19 pandemic.

"This will be a time for us to now reassess and see where we need to go and who we need to speak with to restructure the budget, but also to get it ultimately across the finish line as we have about less than probably three weeks to go," he said. "We take this very seriously, but it's obvious that one person at least didn't feel that we were sufficient, and we'll have to find others who can fill that gap. And it'll probably take some restructuring of the budget to get there."

It's unclear who else Bowers would be able to bring on board to make up for Cook's opposition. Democrats control 29 of the House's 60 seats are the only other option if Bowers and other GOP leaders aren't able to get Cook's vote.

House Minority Leader Reginald Bolding, D-Phoenix, said his caucus stands ready to negotiate on the budget. But the flat 2.5% income tax rate would be a nonstarter for Democrats, he said, as would anything that undermines Prop. 208.

Bolding wouldn't say if House Democrats would be willing to support a smaller income tax cut than the one proposed in the budget.

"Our view has always been (that) when you look at tax policy, you not only plan for the short-term, you also have to plan for the long-term. And if we felt like we'd be putting ourselves in a position where, as a state, we couldn't invest in the short- and long-term, that's something that we would not support," he said.

The Ducey administration has put a high premium on lessening the impact of Prop. 208.

"Governor Ducey believes it's important to provide tax relief to Arizona families and businesses. And we will continue working toward that goal. The governor also believes it's important to protect Arizona's job creators from a tax increase, and we will continue working toward that goal," said C.J. Karamargin, a spokesman for the governor.

Karamargin said Ducey believes the current proposal is in Arizonans' best interests. But, he added, "That being said, negotiations are ongoing."

Even if Cook were to support the budget, there's no guarantee that will improve the budget's chances in the Senate, where Republican Paul Boyer shares his opposition to the tax cut package. Like Cook, Boyer is concerned about the massive income tax cut — projected at $1.9 million annually once fully implemented — and the effect it will have on cities.

Another Republican senator, Michelle Ugenti-Rita, has said she opposes the budget due to what she deemed excessive spending. Similar concerns among conservatives in the House were allayed by the proposed amendments.

In late May, both the House and Senate scheduled votes on the budget bills but canceled them when it became apparent that they didn't have enough support to pass. Ducey responded by vetoing 22 bills and refusing to sign other legislation until he received a budget. On Monday, the House re-introduced the 22 vetoed bills.

The proposed amendments, most of which were for bills that didn't go up for a vote on Monday, make a number of significant changes aside from the increase in shared revenue distributions to cities. Among those proposed changes are:

• Adding $40,000 in funding for the Missing and Murdered Indigenous Women and Girls Study Committee, which would be renamed and given expanded responsibilities.
• Reducing Arizona Department of Transportation funding for pavement rehabilitation projects from $109 million to $90 million
• Authorizes the Arizona Game and Fish Department to provide people who apply for hunting, fishing and trapping licenses with an opportunity to register to vote
• Requires employers to provide reasonable accommodations to employees who refuse COVID vaccinations on religious grounds
• Bars cities, towns and counties from establishing COVID "vaccine passports" or from requiring businesses to restrict patrons who haven't been vaccinated
• Prohibits school district and charter school governing bodies, as well as cities, towns and counties, from mandating face mask usage at K-12 schools
• Bars district schools, charter schools or state agencies from requiring K-12 teachers or other personnel from discussing "controversial issues of public policy or social affairs that are not essential to the course learning objectives"
• Bars government entities from requiring that teachers or other school personnel "engage in training, orientation or therapy that presents any form of blame of judgment based on race, ethnicity or sex"
• Establishes a municipal firefighter cancer reimbursement fund, which would be funded through fees assessed on cities and towns
• Removes affordable housing and angel investor tax credits, which will be run as standalone bills