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Arizona Republicans battle over budget deal

Posted at 2:53 PM, May 26, 2021
and last updated 2021-05-27 01:17:04-04

PHOENIX — The legislature will not complete it's work on the state budget for at least two weeks.

Wednesday night, the House announced it will be in recess until June 10. The state Senate will also recess until June 10 after it completes its work Thursday.

The reason for the delays is because some members have planned vacations next week and would not be available to vote.

The announcements capped a chaotic day at the capitol. The $12.8 billion budget proposal reached the floor of the House Wednesday, but it advanced no further. Democrats are unanimous in their opposition and the Republican majority is not unified in its support.

In the Senate, Republican Michelle Ugenti-Rita was a no-show for the second day in a row. Ugenti-Rita’s absence Tuesday required replacing her on the Appropriations Committee so the budget bills could be moved.

Ugenti-Rita thinks there is too much spending and wants cuts before she votes yes. What is concerning leaders in the House is a threat to derail what Governor Ducey and House leaders see as the most important piece of the 2021-22 budget - the 2.5% flat tax.

“I would just remind everyone here that what we have the opportunity to do is the biggest and most sweeping tax reform in the history of the state,” said House Majority Leader Ben Toma, (R) Peoria District 22.

The flat tax amounts to a $1.5 billion tax cut. It benefits Arizona’s top 1% wage earners the most. It also takes away from Prop 208, by capping the tax rate on the voter-approved measure which raises taxes on top earners to fund education. Republican leaders and the governor want the flat tax adopted before Prop 208 goes into effect.

“We have the funds and 208 hasn’t gone into effect. And when it does then to undo something that’s already there is considerably harder,” said Toma.

The governor says the flat tax keeps Arizona competitive with other states and will help lead to the creation of 550,000 new jobs.

But rural lawmakers like State Representative David Cook of Globe see a $3-$4 billion surplus and question why the state doesn’t pay its bills first. “Florence Unified in my district is still owed 12 million dollars today. Two years ago it had a problem getting their financing done with Wells Fargo.”

Other Republicans worry about the impact on cities and towns. Phoenix Mayor Kate Gallego says Phoenix will lose $82 million if the legislature adopts the flat tax.

Cook says some of the towns in his district will lose 10% of their budget. Cook questions what a flat tax really offers his constituents.

“If you make $300,000 a year you’re going to pay 1% of your income to the general fund. If you make $60,000 a year 2% of your income goes to the general fund. That to me is not fair,” Cook said.

The governor and Republican legislative leaders see the flat tax as the end of a decades-long pursuit to eliminate the state income tax. They realize the time to do it is running out.

“Next year we may not be in the majority and then you’ll never get 2.5%,” said Appropriations committee Vice-Chair John Kavanagh, (R) Scottsdale District 23. “Once you get 2.5% they need two-thirds to reverse it. You get it when you can.”

But Cook and other lawmakers aren’t sure they’re ready to give away that much money. Recent polling by the political consulting firm Highground shows 62% of Arizonans oppose the flat tax. Supporters of Prop 208 are mounting an effort to repeal it if the legislature passes it.

On Wednesday, Cook left the legislature early and several other Republican members may have as well so the House was unable to vote on the flat tax or any of the other budget proposals.