State Capitol News
9:40 am
Fri December 13, 2013

Possible Arizona Tax Change Makes Some Lawmakers Nervous

A special legislative panel voted Thursday to reduce the number of state income tax brackets. But, Arizona Public Radio’s Howard Fischer reports that it’s what might come next that has some lawmakers concerned.

Sen. Steve Yarbrough and Rep. J.D. Mesnard confer about proposed changes in state income taxes. The special panel Mesnard is chairing is recommending collapsing income tax brackets, future indexing — and moving toward a single rate.
Sen. Steve Yarbrough and Rep. J.D. Mesnard confer about proposed changes in state income taxes. The special panel Mesnard is chairing is recommending collapsing income tax brackets, future indexing — and moving toward a single rate.
Credit Capitol Media Services photo by Howard Fischer

Current tax rates for singles run from 2.59 percent for the first $10,000 up to 4.54 percent for everything over $150,000, with three rates in between. The plan pushed by Rep. J.D. Mesnard would keep the top and bottom rates the same, but with a single in-between rate that has a narrower gap between the extremes. But, Mesnard admitted he sees this as an interim step toward a single tax rate.

“At the very beginning we spent time trying to figure out what makes good tax policy. And a single rate system meets that criteria, more than anything else,” Mesnard said.

Mesnard insisted this is not a flat tax where everyone pays a set percent of income. He said there would be adjustments in deductions and credits, as it would be politically unacceptable to propose a system where people on the bottom half of the income scale pay more and those at the top pay less. But, Sen. Steve Farley said he fears that Mesnard’s single tax rate is just an interim step toward that flat tax.

“Why should we move toward that direction if the pure version of going toward that direction is so reprehensible to everyone on this committee?” Farley asked. “Ultimately the people in Arizona who are struggling right now are the middle class and the working class.”

The panel’s recommendations now go to the full legislature.