ARIZONA HOUSE OF REPRESENTATIVES

Fifty-seventh Legislature

First Regular Session

Senate: FIN DP 4-3-0-0 | 3rd Read 17-12-1-0-0

House: WM DP 5-2-0-2

SB 1318: income tax rate; reduction; surplus

Sponsor: Senator Mesnard, LD 13

Caucus & COW

Overview

Directs the Joint Legislative Budget Committee (JLBC), for each Fiscal Year (FY) beginning with FY 2026, to determine specific state General Fund revenue metrics and requires the Department of Revenue (DOR) to reduce the individual income tax rate by 50% of the structural surplus for each Taxable Year (TY) beginning with TY 2026.

History

The individual income tax rate is levied at a single rate of 2.5% beginning with TY 2023 on the entire taxable income of every resident of this state and on the entire taxable income of every nonresident that is derived from sources within this state. (A.R.S. § 43-1011). The federal adjusted gross income is the starting point for Arizona's individual income tax, which is subject to various additions, subtractions and deductions, as applicable (A.R.S. Title 43, Chapter 10).

Provisions

1. Requires JLBC, for FY 2026 and each FY thereafter, to determine:

a) the growth limit and amount of excess state tax collections; and

b) the structural surplus and the Arizona taxpayer return if the ongoing state general fund revenues are more than the growth limit. (Sec. 1)

2. Defines Arizona taxpayer return, excess state tax collections, growth limit, inflation, population growth and structural surplus. (Sec. 1)

3. Mandates DOR, for each TY beginning with TY 2026, to reduce the Arizona individual income tax rate for the current taxable year so the amount of the rate reduction is equal to the Arizona taxpayer return for that year. (Sec. 2)

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7. SB 1318

8. Initials VP/DD Page 0 Caucus & COW

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