Arizona’s legislators, near the end of an unusual session, have nearly finished the budget, just days before the end of the fiscal year. As usual, the process wasn’t pretty, but there is much to like in the budget.
In 2020, Arizona voters narrowly approved Proposition 208, known as the Invest in Education Act Initiative. It raised the income tax on the highest earners, but a legal challenge may yet overturn it. Gov. Doug Ducey had worked hard to raise funding for education, and he had success at that. There is widespread public support for school funding, but Prop. 208 has made the state income tax one of the highest in the nation.
As we’ve said before, Arizona should not be among the lowest-taxed states in the country, but it also should not be among the highest. High taxes discourage investment in the state, hurting the economy and ultimately the state’s coffers.
Ducey sought to impose a flat tax to benefit the highest payers as an attempt to offset the effects of Prop. 208, which cannot be changed by the Legislature. He got most of what he asked for, although Rep. David Cook, R-Globe, held out for a compromise that guarantees a certain level of revenue to cities and phases in the flat tax. After some chaos in the session, that made Ducey’s plan better.
The Republicans have a very narrow margin in both houses, so getting the budget passed is taking a while. Sen. Kelly Townsend, R-Mesa, held out for relinquishment of Ducey’s emergency powers.
The state is emerging from the pandemic with a strong economy, although inflation is troubling nationally and will cause serious problems if it isn’t checked. Because of the economy, the budget, even with the tax cut, is adequate.
— Donovan Kramer Jr.