Democratic Gov. Katie Hobbs vetoed a tax plan proposed by GOP lawmakers that would have aligned with the federal tax code, and denied the state revenue department’s assertion that her own plan doesn’t align with their guidance.
The GOP plan would have conformed to the tax structure in the so-called “Big Beautiful Bill” signed by President Trump last year, slashing state income tax revenues by about $441 million. Hobbs has said she would veto any measure that came across her desk that aligned with that tax plan, saying it favors special interests.
"We want a firefighter working overtime to keep his neighbor safe to know that he'll get a tax break. We want a senior working part-time as a Walmart greeter to get a tax cut. We want a waitress working hard to put food on the table to get a tax cut. The middle class must be our priority," Hobbs said.
Her own plan is compiled of parts of the federal bill, but would only cut taxes by about $250 million.
On Wednesday, representatives from the Arizona Department of Revenue — an agency that reports to the governor — told lawmakers that the guidance they’ve put out to taxpayers doesn’t match up with either Hobbs’ plan or the GOP plan.
If lawmakers end up passing a new tax plan that doesn’t align with the guidance that’s already out there, ADOR said some people will have to file amended returns, and that they would need more staff and more funding to fix it.
Legislative leaders say the veto will lead to confusion for Arizonans trying to file their taxes as there’s not yet an approved code.
“They have no plan to pay for it. Their actions are the height of irresponsible and reckless budgeting. And this morning, I vetoed it,” Hobbs said of the Republican proposal.
House Republicans put out a statement in November asking Hobbs to call a special session so they could address tax conformity ahead of the filing season, as some other states did, but she decided not to.
On Friday, Hobbs told reporters that’s because it would have been pointless to call lawmakers into special session without negotiating first.
“I don’t think it makes a lot of sense to call folks to come down to the Capitol to cost taxpayers extra per diem, so they’re doing that if we don’t have an agreement worked out before we get to the table,” she said.
Hobbs accused Republicans of not coming to her to negotiate, just as they said she wouldn’t work with them.
She also denied ADOR’s assertion that their tax plans don’t match.
“The DOR forms do conform to my plan, that is what I directed them to do,” she said.
“If Arizonans file today using the forms that ADOR has provided, and we pass conformity — any version of it — they won’t have to file amended returns,” Hobbs later said.
But her spokesperson Christian Slater acknowledged that people will have to file amended returns, it’ll just be a small part of the population.
“So, there will have to be some amended reforms,” He said. “But again, assuming that the middle class tax cuts package does get passed, the vast, vast, vast majority … those people will not have to refile.”
Under the One Big Beautiful Bill Act, the cap on state and local tax deductions was raised from $10,000 to $40,000 for taxpayers who itemize their deductions instead of using the standard deduction.
Keeping the cap at $10,000 is actually something Republicans and Hobbs both agreed to do, but the increase is folded into ADOR’s current guidance.
So if someone files their taxes under ADOR’s current guidance and chooses to itemize their deductions, they could owe money if the GOP or Hobbs plans are enacted.
Sen. J.D. Mesnard (R-Chandler) said Thursday that everyone should hold off on filing their taxes until lawmakers can agree on state tax policy.
Slater said Hobbs wants to negotiate some tax provisions as part of the state budget, which is where most financial issues are sorted out.
“The governor is more than willing to negotiate on those issues. What she wants to prioritize is the middle class tax cuts,” Slater said.
Essentially, she wants to pass her smaller tax cut package now, and said she’s open to passing more tax cuts later on.
But, the state budget doesn’t usually get passed until the beginning of the summer or the end of spring — after the April 15 tax filing deadline.
-
Negotiators are focusing on a five-year agreement for sharing water from the shrinking river. Experts say that would provide some much-needed flexibility. -
Democratic Congresswoman Yassamin Ansari of Arizona introduced a trio of bills — including one called the Drain ICE Act, which would rescind the $75 billion a GOP-crafted spending bill earmarked for the agency last year. -
A pair of education groups are proposing a ballot initiative to rein in Arizona's universal school voucher program — which has ballooned to a nearly billion-dollar-a-year expense since first approved in 2022. -
A new lawsuit filed by the American Civil Liberties Union contends that the state can’t stop “advanced practice clinicians” — like nurse practitioners — from performing abortions in Arizona. -
Conservationists argue that delisting should be based on the population, genetic diversity and long-term viability of the wolves, as required under the Endangered Species Act of 1973.
