Arizona’s tax coffers are thinning a little, as the state’s taxpayers no longer have to render as much of their paychecks to Phoenix.
The Joint Legislative Budget Committee released a preliminary revenue estimate for May, so state lawmakers have that information going into session on June 12. It estimates revenue for April and May was $152 million below the last forecast. It attributed much of the drop to personal income taxes.
“The enacted budget forecast assumed a payment decline of (45)% during these 2 months due to the implementation of the lower Individual Income Tax rates,” the estimate reads. “Instead, IIT payments declined by (54)% (which is $971 million below last year).”
Former Gov. Doug Ducey enacted a flattening of the state’s income tax in 2021. The new law gradually lowered the state’s progressive income tax to a flat 2.5% based on economic indicators. Due to larger-than-expected economic growth, Ducey ordered the state’s income tax to fully flatten on Jan. 1, 2023. The change means the average taxpayer will save around $350 this year. In turn, it means less money in state coffers.
The JLBC said the estimated cost was based on the Department of Revenue’s income tax model, which uses taxpayer returns and economic assumptions.
The lower-than-expected revenue leaves the state with an estimated final surplus of just $8 million for fiscal year 2024.
June, JLBC said, is a month that could see swings in either direction.
“In terms of revenue, June is an estimated payment filing month for both Individual and Corporate Income Tax payments. While Corporate Income Tax collections have remained strong throughout the fiscal year, any June Corporate Income Tax gains may be offset by Individual Income Tax payment losses,” the committee told lawmakers.
The state also absorbs unclaimed property, which can be volatile.
The committee will have a full revenue estimate on June 20.
Republished with the permission of The Center Square.
