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ARIZONA STATE SENATE
Fifty-Fourth Legislature, Second Regular Session
individual income tax; rate adjustment
Purpose
Directs the Joint Legislative Budget Committee (JLBC) to compute the individual income tax rate reduction and requires the Arizona Department of Revenue (ADOR) to reduce the individual income tax by the computed amount in the following year.
Background
The individual income tax is levied on the personal income of full-time residents and prorated for part-time residents of Arizona. The starting point for Arizona individual income tax is the federal adjusted gross income. Arizona uses a graduated rate structure, which currently ranges between 2.59 percent and 4.5 percent of Arizona taxable income depending on the taxpayer’s income level.
For taxable years between December 31, 2014, and December 31, 2020, ADOR must adjust the income dollar amounts for each rate bracket according to the average annual change in the metropolitan Phoenix Consumer Price Index published by the U.S. Department of Labor, Bureau of Labor Statistics. The revised dollar amounts will be raised to the nearest whole dollar. The income dollar amounts for each rate bracket may not be revised below the amounts prescribed in the prior taxable year (A.R.S. § 43-1011).
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Single or Married Filing Separately |
Married Couple or Head of Household |
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Taxable Income |
Tax |
Taxable Income |
Tax |
|
$0-$26,500 |
2.59 percent of taxable income |
$0-$53,000 |
2.59 percent of taxable income |
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$26,501-$53,000 |
$686, plus 3.34 percent of the amount over $26,500 |
$53,001 - $106,000 |
$1,373, plus 3.34 percent of the amount over $53,000 |
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$53,001-$159,000 |
$1,571, plus 4.17 percent of the amount over $53,000 |
$106,001-$318,000 |
$3,143, plus 4.17 percent of the amount over $106,000 |
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$159,001 and over |
$5991, plus 4.50 percent of the amount over $159,000 |
$318,001 and over |
$11,983, plus 4.50 percent of the amount over $318,000 |
If the amount of individual income tax collected is reduced, there may be an impact to the state General Fund (GF).
Provisions
1. Directs the JLBC, for the purposes of computing the individual income tax rate reduction for each fiscal year beginning in FY 2021, to:
a) determine the amount of ongoing state GF revenues collected;
b) determine the amount by which ongoing state GF revenues exceed the grown limit; and
c) multiply the amount of revenues exceeding the grown limit by 50 percent.
2. Requires ADOR, for each fiscal year beginning after June 30, 2020, to reduce the individual income tax for the next taxable year by an equal percentage such that the total amount of the rate reduction is equal to 50 percent of the amount determined by JLBC by which ongoing state GF revenues exceed the grown limit.
3. Stipulates that if the amount determined by JLBC by which ongoing state GF revenues exceed the growth limit is equal to or less than zero the individual income tax rate reduction must equal the rates for immediately preceding taxable year.
4. Requires the JLBC staff to provide an annual estimate of the growth limit and the likelihood of ongoing state GF revenues exceeding the growth limit based on the most recent available data.
5. Defines growth limit, inflation and population growth.
6. Applies to all taxable years beginning January 1, 2021.
7. Becomes effective on the general effective date.
Prepared by Senate Research
February 3, 2020
MG/gs