Flat-Tax Proposal Fails In Arizona House
With a one-vote majority and a total lack of support from Democratic representatives, GOP leaders in the Arizona House knew it would only take one dissenting Republican vote to torpedo a budget deal negotiated with Gov. Doug Ducey.
They also knew GOP Rep. David Cook is no fan of a plan in the budget to flatten and cap Arizona’s income tax rates, a move legislative analysts estimate will reduce state revenue by $1.9 billion annually.
Yet House Speaker Rusty Bowers and Majority Leader Ben Toma forced a vote on the budget anyway — a move Toma acknowledged was designed to put pressure on Cook to support a $12.8 billion spending plan supported by the other 30 Republican representatives.
It didn’t work.
Cook united with Democrats to defeat two of the 11 bills that comprise the GOP budget deal. The tie votes, 30-30, ensured the bills cannot advance as-is.
At issue is a proposed tax cut, hailed by most Republican lawmakers as the largest in Arizona history. The proposal would flatten Arizona’s income tax rate to 2.5%, compared to the progressive tiers of rates Arizonans now pay depending on their income. Those tiers run from 2.59% on taxable income up to $53,000 for married couples, with a top rate of 4.5% on amounts above $318,000.
The Republican budget proposal would also create a 4.5% cap on total income tax liability to shield wealthy Arizonans from Proposition 208, a voter-approved 3.5% surcharge on income above $250,000 for individuals and $500,000 for couples, with that revenue earmarked for K-12 education.
Without those two changes, the top tax rate on the most wealthy is 8% — the current 4.5% top bracket plus the 3.5% surcharge.
Democrats unanimously oppose the tax cut, which they say is designed to undermine the will of voters who just approved Proposition 208 in November. Unlike the minority caucus, Cook isn’t opposed to cutting taxes — he noted he’s voted to cut taxes every year he’s been in office at the House — but cited warnings from the state’s top economists that a massive tax cut could upend the state’s economy.
“In April, the Finance Advisory Committee met and reviewed the state’s economic situation and concluded that we should not ‘cut too deep’ in tax cuts because the rewards are not worth the risk involved,” Cook said while explaining his vote against the flat tax.
It was a trying moment for Cook, who watched from the state Capitol in Phoenix as wildfires threatened his legislative district and his own home.
“Just got word at my house that they are asking us to evacuate,” Cook tweeted during the budget debate from the Capitol. “I was brought away from my home to vote on bills that did not have the votes in the House or Senate on purpose to be on record.”
Republican leaders did not shy away from the fact the vote was intended to put the spotlight on anyone who opposed the budget deal. Last week, Toma said any budget holdouts would have to “explain why they’re holdouts on the floor.” In an exchange on the House floor, Cook asked Toma, “Don’t you think I want to cut taxes?”
“I think we’re about to find out,” Toma replied.
The testy vote again leaves Republicans at an impasse, and not just in the House. Senate Republicans tried and failed to force a budget vote ahead of Memorial Day weekend, and haven’t returned to the Capitol since before the holiday. Senate Republicans also hold a one-vote majority, and at least one GOP senator, Paul Boyer, also opposes the tax cut in the budget.
Both chambers are now adjourned until Thursday, with no clear path to passing a spending plan for the state ahead of a June 30 deadline.
Toma, a Peoria Republican, defended the tax cut as a way to stimulate the economy, and defended the proposal against comparisons to disastrous tax cuts enacted in Kansas in 2012 that wreaked havoc on the state’s budget. As for structuring the tax plan in such a way that most of the benefits are felt at the top of the income scale, Toma said it makes sense.
"They're the ones that make the jobs and create the economic conditions that benefit the entire state,'' he said.
Democrats decried the tax cut as another example of failed trickle-down economics — policies that promise an indirect benefit to working-class Arizonans but never deliver, according to House Minority Leader Reginald Bolding, D-Laveen.
"The reality is, without these working-class people there wouldn't be jobs, there wouldn't be an economy, there wouldn't be people making sure that people in Arizona have the ability to stand up and to be able to do the things that they want to do here in Arizona,'' he said.
Howard Fischer of Capitol Media Services contributed to this story.