PHOENIX — Gov. Katie Hobbs took a victory lap Tuesday for the $1.4 billion tax cut package included in the new state budget, but a Senate Republican pointed out the governor vetoed the cuts three different times.
“Throughout this session, I fought to deliver middle-class tax cuts, and now I'm proud to say that we have delivered,” Hobbs told reporters.
The governor was flanked by signs dubbing the tax cuts “Hobbs’ $1.4 billion middle class tax cut.”
“Some would say the fourth time is a charm, and on the fourth time, you take credit for something that was most definitely not your idea,” said state Sen. T.J. Shope, the Arizona Senate’s president pro tempore.
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The tax cuts, one of the largest in Arizona history, are primarily made up of state versions of tax breaks from President Donald Trump’s big tax law, including a larger standard deduction, deductions for tips and overtime and tax breaks for businesses.
“We're putting more money back in your pocket and ensuring you have what it takes to make ends meet at the end of the month,” Hobbs said.
The governor had called for passage of cuts she dubbed a "middle-class tax cut package," the deductions for tips and overtime, the bigger standard deduction and a $6,000 deduction for seniors.
The state budget includes a deduction for childcare costs developed by House Republicans.
“I guess the governor saw the light and what we were trying to do to make Arizona a more affordable place to raise a family and to make ends meet,” Shope said.
When asked why she appeared to be taking credit for Republican tax policies, Hobbs told reporters: “Look, I'm really not interested in playing the ‘who gets credit’ game. The fact is that Arizonans are going to benefit from these tax cuts.”
Shope called it politics as usual.
“It's the height of political expediency, because there's an election coming up that she's concerned about in November,” he said.
The battle over conforming Arizona’s tax code to the new federal cuts consumed the early weeks of the Legislature, with Hobbs vetoing two tax-conformity bills and a Republican budget plan.
“I refused to sign a budget that sold Arizona short in order to prioritize tax cuts for billionaires and special interests,” Hobbs said.
The tax cuts are largely unchanged from the vetoed Republican budget. The cuts – including business tax breaks – add up to $1.4 billion over four years.
When asked why she was characterizing the cuts as a break for the middle class when the figure includes provisions for businesses, Hobbs said the bulk of the cuts are for middle-class families.
According to figures from the Governor’s Office, two-thirds of tax cuts affect individual filers.
The Governor’s Office said Hobbs objected to two items in the overall tax-conformity package: a special 100% depreciation allowance for businesses and a higher deduction for state and local taxes – or SALT – that primarily benefits wealthy individuals.
Both will be removed from the state’s tax code next year.
Republican lawmakers had opposed the increased SALT deduction but included it for one year so taxpayers who took the deduction this year would not be forced to file amended returns. The state's tax forms included full tax conformity.
“We did not include the SALT deduction in the very first tax conformity bill that we sent to her way back in early January,” Shope said.
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