The resolution HCR 2012 proposes a reduction in the Individual Income Tax (IIT) rate in Arizona from 2.5% to 2.0%, contingent upon voter approval in the 2026 General Election. If passed, this change would take effect starting in Tax Year 2027 and would also apply to individuals filing the Arizona Fiduciary Income Tax Return or those opting for the Arizona Small Business Income Tax Return. The estimated impact of this tax reduction is projected to decrease annual General Fund revenues by approximately $1.22 billion beginning in Fiscal Year 2028.

Additionally, the resolution outlines that the reduction in the IIT rate may lead to a proportional decrease in the usage of nonrefundable Individual Income Tax credits due to the lower tax liability. The analysis indicates that the projected IIT collections for FY 2028 would be around $4.90 billion under the new rate, compared to $6.12 billion under the current rate, resulting in a significant revenue reduction. Furthermore, local governments, which receive a share of income tax collections, would see a decrease of about $221 million in Urban Revenue Sharing distributions by FY 2030 as a consequence of the overall reduction in statewide IIT revenue.

Statutes affected:
Introduced Version: 43-1011, 43-1311, 43-1711, 43-243, 43-244