PHOENIX — The first week of Arizona’s new legislative session will feature a big battle over tax cuts.
The Republican-led Legislature is proposing a $1.1 billion tax cut package that mirrors the federal tax changes in President Donald Trump’s One Big Beautiful Bill at the state level.
Gov. Katie Hobbs issued an executive order last month instructing the Arizona Department of Revenue to start updating tax forms for many – but not all – of the cuts in the president’s new tax law, setting up a clash with Republicans.
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Senate President Warren Petersen said they plan to pass the tax breaks “within days.”
“We want to give the citizens the largest tax cut possible,” he told ABC15 on Friday. “That's what we're going to put on her desk.”
At an Arizona Chamber of Commerce & Industry event Friday, Hobbs said she’s committed to delivering tax cuts for middle-class families.
“We should deliver immediate relief to working families in our state, and we should look at how we're going to pay for the other items in that tax conformity when we do budget negotiations,” she said.
Senate Bill 1106 and House Bill 2153, which includes the One Big Beautiful Bill’s business tax breaks and the income tax cuts, will slash an estimated $1.1 billion in taxes over the next three years.
The bills will be heard Wednesday afternoon in a joint hearing of the House Ways & Means and Senate Finance committees.
Republicans also focusing on housing
Petersen said affordability is Republicans' top priority. In addition to tax cuts, they are looking to build up Arizona’s housing supply so costs can come down.
“We want to cut red tape,” he said. “We want to speed up the process, and we want to increase the supply.”
Lawmakers did not pass any major housing legislation last year. He everything is on the table, including legislation like the bipartisan Arizona Starter Homes Act, which failed to advance in 2025.
“All the local governments need to really step up, speed up the process, because time is money,” he said, adding that the longer it takes to build a home, the more expensive it is.
Bipartisan agreement on Colorado River talks
The future of the Colorado River is the one of the few issues where Republicans and Democrats agree.
The four Upper Basin states – Colorado, New Mexico, Utah and Wyoming – and the Lower Basin states of Arizona, California and Nevada are negotiating over how to divide the river’s water. The current deal expires at the end of the year, and the seven states have until Feb. 14 to reach a deal.
The river has been depleted by decades of drought and overuse. Arizona has the lowest priority in the Lower Basin and will likely shoulder the bulk of any cuts, but talks have been stalled for months.
Petersen said he has met with the Trump administration several times on the issue.
“We really just want to make sure it's fair, that Arizona gets its share of water so that we continue to grow,” he said.
Arizona today uses less water for 7.5 million people than it did when the state had 1.5 million, Petersen said, calling Arizona the “gold standard” of the seven states.
"We have been good stewards of water,” he said. “We've done it properly. We've had explosive growth, and yet we've conserved and used less water.”
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