PHOENIX — On the first day of the legislative session, Gov. Katie Hobbs called on state lawmakers to help make life more affordable for Arizonans.
Hobbs, who addressed a joint session of the Arizona House and Senate for 45 minutes on Monday, called for the Legislature to pass several income tax cuts from President Donald Trump’s One Big Beautiful Bill for Arizona families, such as no tax on tips or overtime, a higher standard deduction and a tax deduction for seniors.
"We should all agree that middle-class families deserve a tax cut now, so Arizonans can get that relief when they file their taxes this spring,” she said.
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It’s likely to be the first big fight of the legislative session.
A $1.1 billion Republican tax package includes those cuts, as well as the tax breaks for businesses in Trump’s new tax law.
“If you think billionaires and big corporations should get a tax break before hardworking families – then you need to spend more time with real Arizonans who are struggling to get by,” Hobbs said.
Republicans are fast-tracking Senate Bill 1106 and House Bill 2153, with joint hearings scheduled for Wednesday. The bill could be voted on as soon as Thursday.
And according to Democratic leaders, Hobbs, who is running for reelection this year, will veto the legislation if it passes.
“This is a package that is riddled with corporate giveaways and special tax breaks to large corporations that does nothing to make life more affordable for Arizonans,” House Minority Leader Oscar De Los Santos, a Democrat from Legislative District 11, told ABC15.
House Speaker Steve Montenegro, a Republican who represents Legislative District 29, said Hobbs has vetoed bills for tax relief passed by the Legislature in the previous three years.
“We've been sending her bills that would lower the tax relief on everyday Arizonans,” he said. “She's been vetoing it.”
The tax bills are designed for “tax conformity,” which means aligning Arizona’s tax laws with the federal government’s. But the state doesn’t have much time: The 2026 tax season starts on Jan. 26, in just two weeks.
“We're going to make sure that we conform to the federal government's Big Beautiful Bill that brings tax relief to everyday middle-class and lower-class Arizonans,” Montenegro said.
More affordable housing
Hobbs proposed a few initiatives in her speech, including $2.5 million for a Housing Acceleration Fund for more affordable housing.
“Let’s keep fighting to bring back the Arizona that I grew up in – one where a working-class couple could buy a house to call home and raise their family in,” Hobbs said.
She asked lawmakers for annual funding.
“The fund leverages public and private dollars to unlock lower-cost financing and multiply the affordable homes we build,” she said. “For every dollar we invest, we’ll generate up to $10 to finance projects that house Arizonans.”
Hobbs also announced a program to help families with utility bills and weatherizing their homes and to build more affordable housing. The Arizona Affordability Fund is starting with $20 million, and Hobbs is proposing a nightly fee on short-term rentals for the long term.
Republicans are focusing on tax relief to address affordability.
“What I heard today was more government spending, more investing in government programs,” Montenegro said.
Repealing Arizona’s data center incentives
Hobbs also called on state lawmakers to rethink Arizona’s approach to data centers.
“It’s time we make the booming data center industry work for the people of our state, rather than the other way around,” she said.
That includes repealing tax incentives to build data centers – a policy Hobbs voted for when she was a state lawmaker. It's an idea with some bipartisan support; a Republican lawmaker is sponsoring a bill to end the tax breaks.
Hobbs is also proposing data centers pay "their fair share for the water they use,” with the money going into a Colorado River Protection Fund aimed at growing conservation efforts.
“The average Arizona family pays 1 cent for every gallon of water used in their home,” she said. “If data centers were to pay the same amount, we could make a multimillion-dollar deposit into the Colorado River Protection Fund every single year.”
Cool reception from Republicans for ESA reforms
The governor again made an appeal for more guardrails on Empowerment Scholarship Accounts, the state’s school voucher program, saying it’s time to “bring accountability to the ESA entitlement program.”
“Even the program’s most ardent supporters must agree: It’s time we tackle the waste, fraud and abuse to ensure taxpayer dollars are going towards true educational purposes,” she said.
While Democrats cheered, Republican lawmakers in the House chamber sat silent.
Montenegro said his party is committed to school choice.
"Here in the Legislature, we're going to back moms and dads in the education of their kids,” he said, adding that his party will do everything they can to “protect the rights of parents.”
Is there a bill or topic you want to see me cover at the Arizona Capitol? Email me at manuelita.beck@abc15.com or message me on Instagram or TikTok.
