State Capitol News
12:54 pm
Wed February 12, 2014

Lawmaker Aims to Save Taxpayers from Cost of Inflation

A state lawmaker wants to save taxpayers from the cost of inflation. Arizona Public Radio’s Howard Fischer explains.

Rep. J.D. Mesnard
Rep. J.D. Mesnard
Credit ktar.com

The way Rep. J.D. Mesnard sees it, Arizonans are getting hit — he believes unfairly — because of inflation. For example, under current law a single person who has an annual adjusted gross income of between $25,000 and $50,000 a year pays a top tax rate of 3.36 percent. But, if someone gets a raise that kicks their salary over $50,000, every dollar earned above that is taxed at 4.24 percent, even if that pay increase simply matches inflation. Mesnard’s legislation would require the Department of Revenue to alter the cut points according to inflation. So, if inflation was at 2 percent, the point at which the higher rate would kick in would go up by the same amount, to $51,000. More to the point, someone whose pay hike was no more than inflation would not have any of it taxed at the higher rate. Mesnard said it’s only fair.

“The feds have acknowledged that. They have an inflationary adjustment every year. A number of states do this. We don’t. I think it makes sense to do this, I think it’s good public policy. I think it’s the fairest to the taxpayer,” Mesnard said.

But, a hurdle remains. While the difference to a taxpayer might be only a dollar or so a year, legislative budget staffers say that bracket creep enriches state coffers by about $10.9 million a year. And the idea of losing that much every year was enough to cause Gov. Jan Brewer to veto a similar plan last year.