The House Ways and Means Committee voted Monday to keep inflation from taking a bigger chunk of your tax dollar. Arizona Public Radio's Howard Fischer explains.
The issue arises because the state's individual income tax system, like the federal model, has various tiers. For example, married couples filing jointly pay 2.59 percent if their state adjusted gross income is $20,000, and 2.88 percent if the figure is even just a penny more. The rates go higher at the $50,000, $100,000 and $300,000 levels, with the tax rate of 4.54 percent at the top. Rep. Rick Gray said those hard and fast break points can be a problem.
"You could have somebody that's making $19,500 and they may even get like a three percent pay raise which would throw them into a higher income tax bracket," Gray said. "Yet if we have a five percent inflation factor, they've actually lost money. Yet they're paying more taxes."
Using his example, that taxpayer with a raise, pushed into the higher bracket, would owe the state more than $578. But if there were indexing, and the taxpayer got hit for the same rate as before, the taxes would be just $520. Gray acknowledged that if his measure becomes law, the state could lose money in the future.
"But this bill isn't focused on making money for the government," Gray said. "It's really saying what's fair for the taxpayer."
The measure now goes to the full House.