The Joint Legislative Budget Committee (JLBC)’s July 2021 fiscal highlights report revealed “extraordinary growth” in the state of Arizona in Fiscal Year 2021.
Based on preliminary revenue data, JLBC determined that the FY 2021 percentage growth rate beat the modern record, growing by 28.8% overall and resulting in total general fund collections of $14.17 billion.
At the end of FY 2021 on June 30, General Fund revenues were $487 million above the recently enacted budget forecast. Now, the cash balance is projected to be $929 million rather than the original $442 million forecast.
FY 2021 held a 66% increase in taxable corporate gains, 18% growth in individual income tax liability (excluding deferred funds), and a 16% increase in sales tax collections. JLBC estimated that such growth was caused by the 13% increase in Arizona personal income caused by the $32 billion of federal pandemic given to the state, a shift in consumer spending to more taxable goods which boosted sales tax collections, a 16% gain in the stock market and 20% gain in home prices which likely boosted capital gains that are subject to income tax.
FY 2021 individual income tax revenues were $2 billion higher than those of FY 2020. Additionally, June 2021 revenues were 30.4% higher than they were last June due to high growth rates in sales tax, individual income tax, corporate income tax, and insurance premium tax.
In the first 3 quarters of FY 2021, Arizona personal income grew by 12.7%, signifying the largest gain since 1985.
This is the first JLBC report since the 2021 legislative session concluded, after which Gov. Doug Ducey signed the largest tax cut in Arizona history, beginning the state’s transition from a five-bracket tax system to a 2.5% flat tax regardless of income.
The governor’s office said in a press release that the report demonstrates Arizona’s resilience.
“It paints a picture of a state economy that has emerged from the COVID-19 pandemic not only in great shape, but poised to achieve even greater accomplishments in the years ahead,” the press release said. “The ‘extraordinary growth’ Arizona saw in Fiscal Year 2021 is positive news for every Arizonan. We are leading the way in the nation's economic recovery.”
Ducey’s income tax changes are uncertain, as opponents are gathering signatures to put a veto initiative on the 2022 ballot. If successful, the tax rates would remain the same.
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