Ducey signs Az budget, with tax cut for wealthy, with just hours to go before end of fiscal year

With the start of the new fiscal year less than eight hours away, Gov. Doug Ducey signed a $12.8 billion Arizona state budget shortly after lawmakers sent the final two budget bills to his desk.

“Today I’m proud to sign a budget that delivers for Arizonans,” Ducey said in a press release. “Each and every Arizona taxpayer, no matter their income, will experience a tax cut under our historic tax reform. That means job creators will continue to choose our state to expand operations, working families will get to decide how they spend more of their hard-earned dollars, and those who served our nation will rightfully keep more of their own money.”

Arizona Democrats said that the Republican governor and Legislature backed a budget that "squanders opportunity."

The highlight of the fiscal year 2022 budget is a massive income tax cut that replaces Arizona’s progressive income tax rates with two rates — 2.55% for people who earn $27,272 annually and 2.98% for those who earn more than that — at a projected cost of about $1 billion in state revenue annually. The rate will drop to a flat 2.5% for all income tax brackets if state revenue meets certain thresholds over the next few years.

Arizonans who earn at least $250,000 and couples who earn at least $500,000 will get an additional break to help offset the effect of Proposition 208, a 3.5% income tax surcharge that voters approved in November. The tax cut plan imposes a maximum rate of 4.5% for high-income earners subject to Prop. 208.

"Arizona is a politically purple state with a $2 billion surplus," state House Democratic Leader Reginald Bolding said in a press release. "We had a once-in-a-generation opportunity to step up in a bipartisan way and make a real difference for a state hit hard by the pandemic, and a state that remains plagued by chronically underfunded schools, prolonged drought, inadequate healthcare, a lack of affordable housing and mounting infrastructure needs. The Republican budget squanders that opportunity."

"With a single-vote majority in both chambers, Republicans passed an irresponsible and permanent $1.7 billion tax giveaway to the wealthy," Bolding said.

Nine of the 11 budget bills reached Ducey’s desk last week, but a dispute over state-mandated K-12 curriculum and a proposed expansion of Arizona’s school voucher system delayed the final two bills until Wednesday.

The Senate tacked Sen. Paul Boyer’s proposal to dramatically expand the Empowerment Scholarship Account program, which provides parents with cash for educational purposes in exchange for pulling their children from public schools, onto the K-12 education budget bill. But the proposal was removed in the House and voted on as a separate bill, which died after three Republicans voted with their Democratic colleagues against it.

In addition to the ESA issue, Boyer was opposed to a provision that the House added to the bill requiring the state Board of Education to require “a comparative discussion of political ideologies, such as communism and totalitarianism, that conflict with the principles and freedom and democracy” to K-12 civics curriculum standards. Boyer, R-Glendale, expressed concern over the legislature mandating curriculum.

When the bill returned to the Senate on Wednesday, Boyer proposed an amendment to remove the new curriculum requirements and reinstate parts of his ESA bill without expanding eligibility for the voucher program, which cleared the way for the passage of the final two bills.