John --

Hello and welcome to our fourteenth weekly update on all things legislative session!

Today marks the 100th day of session, which is usually the target date for the legislature to wrap up its business and look to adjourn. I can confirm that we are in fact nowhere near wrapping up, with every expectation that we will still be at work well into May, and possibly even extend into June.

To put that in context, that would be the longest session of my five years at the capitol. 2019 was the longest, when we went all the way to Memorial Day. 2017 and 2018 both wrapped up in early to mid May, with last year as a kind of outlier because of the COVID-19 pandemic.

Last week was a relatively quiet one at the capitol, with floor sessions taking up the majority of our time. We did spend quite a bit of time on the floor on Monday, when we debated and voted on SB 1797, the online sports betting bill. 

On Thursday, many of us trekked to the Heard Museum for the governor’s bill signing of the legislation, with nearly all the Arizona tribes in attendance. This bill is a big deal, as it revises the gaming compact that the tribes have with the state, expands the types of games that casinos can operate, and legalizes online sports betting. 

This week is also looking to be a light one. We aren’t even coming in on Wednesday, as we received word yesterday that we will adjourn our floor session today and reconvene on Thursday. The only possible reason I can think of for this is to plan budget conversations, since the number of bills we have to debate and vote on at this time is relatively low.

So what’s going on with the budget, you ask? Based on the conversations I have had with my colleagues over the last week, here is the latest (of what I’ll share, that is!):

-The House tax plan does not have the votes in either the House or the Senate. That could change of course, but right now it doesn’t have the votes.

A refresher on what the House tax plan would do: it would cut roughly $1.5 billion annually by transitioning our state income tax to a “flat tax,” where there is one rate of 2.5% for all taxable income. Right now we have four tax brackets, with the lowest set at 2.59% and the highest at 4.5%. That means as you make more income, the tax rate on that amount of income above each threshold goes up. 

So yes, technically, every taxpayer would receive a tax cut, but the gains would overwhelmingly benefit those at the higher end of the income scale. 

I will also point out that for those taxpayers who do not pay the surcharge from Prop 208 last year, meaning individual filers who make under $250,000 a year or couples making under $500,000 a year, Arizona has, on average, one of the ten lowest income tax rates in the country. 

That’s over 90% of Arizona taxpayers, paying one of the ten lowest income tax rates in the country. Proponents of the flat tax proposal will point out that we need to do more to be competitive with states like Texas and Nevada, who do not have state income tax rates.

True! Those states do not have a state income tax. Nevada receives over 40% of its state revenue from gaming taxes, and Texas has a lot of oil in the ground they receive taxes from, and their property taxes are much higher than Arizona’s.

The dollars to fund the basic operations of state government need to come from somewhere. Our state income tax currently constitutes about 43% of the revenue in our entire state budget. 

My Republican colleagues have raised concerns about the plan too: it will hurt cities and towns (who collectively receive about 15% of the overall state income tax revenue), it’s too large of a tax cut, it would disproportionally benefit urban districts as opposed to rural districts, and so on.

While we’re talking tax reform, I have a great tax cut bill that passed out of the Senate with broad bipartisan support! It’s SB 1040, and it would create a state Earned Income Tax Credit (EITC), where the dollars would directly go to low income working families who could really use the support right now. Let’s include that in the budget!

-Lots of support for infrastructure investment and paying down debt. Last year, before the pandemic hit, there was a lot of talk at the capitol about investing in infrastructure. The proposed ideas were largely one-time investments in needed maintenance and construction across the state. They would create jobs, help with economic development, and they wouldn’t tie us to long-term costs. Win-win!

Almost all of those projects were shelved because of the pandemic, but talking to my Senate Republican colleagues over the last week, many of them would like to see us make a substantial commitment to infrastructure. I agree!

There is also a lot of talk about using this opportunity to use one-time dollars to make a dent in some of the debts we owe the state. This includes buying back the rest of the state buildings we sold off during the recession (we now own the capitol again, but not some of the state government buildings surrounding the capitol), paying off pension debt that we owe, and looking at reducing the K-12 rollover, which currently sits at over $900 million a year. 

All of these ideas would use one-time dollars AND save the state money in future years by reducing interest payments. Another win-win, right? 

-Bipartisan support for efforts on affordable housing. This has been a welcome surprise, as my colleagues and I keep reading stories about the problem of affordable housing throughout the state. There are two big programs that are showing momentum this year: a restoration of the Housing Trust Fund, which helps fund affordable housing projects throughout the state, and the creation of an affordable housing tax credit, where projects would only receive tax credit dollars after construction is completed and certain metrics are met.

I’d love to see the restoration of the Housing Trust Fund on a permanent basis, but even a one-time investment would make a huge difference. I’m optimistic that we will see at least one of these ideas, if not both, in the budget this year.

I will continue to walk the hallways this week and continue having conversations with my colleagues in the majority on shared ideas and priorities for our budget this year. And the way it looks now, we may be sticking around for a while.

As always, you can count on further updates in this weekly newsletter!

Thank you for reading this week, and remember that you can receive more regular updates from me on my Facebook and Twitter pages.

Until next week!

Thank you,

Sean 

http://www.seanbowieforaz.com/

Paid for by Sean Bowie for State Senate. Authorized by Sean Bowie.