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ARIZONA STATE SENATE
Fifty-Fifth Legislature, First Regular Session
AMENDED
individual income tax; rate adjustment.
Purpose
Directs the Joint Legislative Budget Committee (JLBC) to compute an individual income tax rate reduction and requires the Arizona Department of Revenue (ADOR) to reduce the individual income tax rate 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 4.50 percent of Arizona taxable income depending on the taxpayer’s income level.
For taxable years beginning January 1, 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 must be raised to the nearest whole dollar and may not be revised below the amounts prescribed in the prior taxable year (A.R.S. § 43-1011).
|
Single or Married Filing Separately |
Married Couple or Head of Household |
||
|
Taxable Income |
Tax |
Taxable Income |
Tax |
|
$0-$26,500 |
2.59% of taxable income |
$0-$53,000 |
2.59% of taxable income |
|
$26,501-$53,000 |
$686, plus 3.34% of the amount over $26,500 |
$53,001-$106,000 |
$1,373, plus 3.34% of the amount over $53,000 |
|
$53,001-$159,000 |
$1,571, plus 4.17% of the amount over $53,000 |
$106,001-$318,000 |
$3,143, plus 4.17% of the amount over $106,000 |
|
$159,001 and over |
$5991, plus 4.50% of the amount over $159,000 |
$318,001 and over |
$11,983, plus 4.50% 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 2022, to:
a) calculate the growth limit for the following fiscal year;
b) calculate the amount of ongoing state GF revenues for the following fiscal year;
c) estimate the amount of structural surplus for the immediately following year, if the amount of ongoing state GF revenues exceeds the growth limit; and
d) multiply the estimated structural surplus by 50 percent.
3. Requires ADOR, for each taxable year beginning January 1, 2022, to reduce the individual income tax rates for the current taxable year by an equal percentage such that the total amount of the rate reduction is equal to 50 percent of the estimated structural surplus.
4. Stipulates that if 50 percent of the estimated structural surplus is equal to or less than zero, the individual income tax rate reduction must equal the reduced individual income tax rates for the immediately preceding taxable year.
5. Defines growth limit, inflation and population growth.
6. Applies to all taxable years beginning January 1, 2022.
7. Makes a conforming change.
8. Becomes effective on the general effective date.
Amendments Adopted by Committee of the Whole
· Corrects the formula that JLBC must use to compute the individual income tax rate reduction.
Senate Action
FIN 2/17/21 DP 5-4-1
Prepared by Senate Research
February 24, 2021
MG/gs