PRIMER: Arizona Tax Reform Plan

News Release

May 22, 2019

Simpler, Fairer And Revenue Neutral

The Arizona Tax Reform plan represents the most significant tax reform for individuals in the last 30 years — making Arizona’s tax code simpler and more fair. The plan builds on the already substantial tax relief passed as part of President Trump's Tax Cuts and Jobs Act, while protecting investments in the things that matter and prioritizing middle and low-income earners.

Simpler

  • The plan reduces income brackets from five to four, the first time income brackets have been reduced in Arizona since 1990, joining Arizona with 31 other states with four or fewer individual income tax brackets.
  • The plan significantly increases the standard deduction:
    • For single filers, the standard deduction increases from $5,312 to $12,000.
    • For married filers, the standard deduction increases from $10,613 to $24,000.
    • FACT: With this increase, Arizona’s standard deduction now matches the federal standard deduction for the first time in state history.
  • Based on federal estimates, as many as 90% of taxpayers could be taking the standard deduction on both their state and federal forms, creating a much simpler filing process.

Fairer

  • The plan reduces income tax rates for all filers, while prioritizing middle and low-income earners.
  • FACT: The plan represents a 27% income tax decrease for the median filer (those who make roughly $40,000).
  • Under the plan, middle and low-income filers will receive the greatest share tax relief:
    • For example, those making between $20,000 and $75,000 a year will see an annual income tax reduction between 13.6% and 63%.
    • The median tax filer will receive roughly $135 in tax relief under the plan.

Revenue Neutral

  • The plan remains revenue neutral while protecting the things that matter most like K-12 education, public safety and our most vulnerable.
  • The plan preserves exemptions for the blind and seniors (65+) as well as the exemption for enhanced medical deduction, protecting those with significant, ongoing medical costs.

Prioritizing Families and Charitable Giving

  • The plan establishes a new child tax credit equal to $100 per dependent child, providing additional tax relief to families.
  • The plan also allows taxpayers who take the standard deduction to subtract 25% of annual charitable giving, encouraging charitable giving.

 So who are the big winners under this plan?

  • Taxpayers: Under the historic plan, Arizonans will have the simplest income tax code in state history, paired with marginal tax decreases for most income brackets. The greatest relief will go to middle class and low-income earners. Increased standard deductions will also contribute to a simpler, fairer and flatter tax code.
  • Families: Families will receive a new $100 per child tax credit, which will mirror a similar tax credit at the federal level.
  • Charities and nonprofits: The plan creates a new charitable tax credit, incentivizing donations to organizations that help those most in need.
  • Teachers and students, law enforcement personnel and our most vulnerable: By remaining revenue neutral, the plan protects critical investments in K-12 schools, law enforcement salaries, infrastructure, child safety, programs to provide a hand-up to those in need and more.
  • Arizona's Rainy Day Fund: As part of the budget agreement, Arizona will invest $542 million into the Rainy Day Fund — bringing the fund to a record $1 billion and ensuring our state is prepared for the inevitable and unexpected.

View full details of the budget HERE.