The resolution HCR 2012 proposes a reduction in the Individual Income Tax (IIT) rate in Arizona from 2.5% to 2.0%, effective for Tax Year 2027, contingent upon voter approval in the 2026 General Election. This reduction 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 change is a reduction in annual General Fund revenues by approximately $1.22 billion starting in Fiscal Year 2028, based on projected IIT collections.

Additionally, the resolution outlines that the decrease in IIT revenue will also affect local governments, as they receive a portion of income tax collections through the Urban Revenue Sharing Fund. Consequently, the overall distributions to cities and towns are expected to decrease by about $221 million in Fiscal Year 2030 due to the reduced statewide IIT revenue. The resolution emphasizes the potential economic implications of the tax rate reduction, suggesting that it may incentivize increased taxpayer consumption, which could lead to greater economic output, although it also notes the possibility of lower state spending affecting overall economic activity.

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