Arizona Tax Conformity Debate: GOP Pushes, Hobbs Stands Firm

Arizona Tax Conformity Debate Intensifies Between Republicans and Governor Hobbs

The political landscape in Arizona is increasingly tense as Republican lawmakers push for a tax measure alignment with the federal policy and the state’s Department of Revenue guidance. However, Democratic Governor Katie Hobbs is resisting the move, leading to a stalemate.

At the heart of the issue is a federal budget bill passed last year, which introduced significant tax cuts. While Governor Hobbs is in favor of implementing a part of these cuts, she has made it clear that she will not consider other conformity plans unless her proposal is enacted.

Governor Hobbs recently vetoed a Republican-led plan designed to align state tax policies with federal standards, with modifications. Despite this, neither the governor’s nor the GOP’s proposals fully align with the Arizona Department of Revenue’s tax filing guidance.

Republicans are now advocating for an approach that directly matches the Department of Revenue’s guidance to prevent taxpayer confusion. During a committee hearing on January 14, ADOR highlighted discrepancies between the governor’s plan and their guidance, warning that changes might necessitate amended tax filings for Arizonans.

GOP lawmakers have expressed frustration over Governor Hobbs’ lack of engagement in negotiations or convening a special session to resolve the issue ahead of the tax season. In a statement, they criticized Hobbs for not addressing contradictions between her public statements, proposed budget, and the tax forms required from taxpayers.

Questions have also been raised regarding why the Department of Revenue, operating under Hobbs’ oversight, appears to be at odds with her tax policy.

Rep. Justin Olson (R-Mesa) commented on the situation, saying, “The filing season is already underway, and the lack of clarity is creating confusion and serious problems.” He added that HB 2785 aims to codify the Department of Revenue’s tax filing instructions to avoid taxpayers needing to file amended returns.

Meanwhile, Governor Hobbs’ spokesperson, Christian Slater, accused Republicans of pushing through a tax cut plan that disproportionately benefits “special interests and billionaires” rather than middle-class and lower-income families. Slater emphasized, “The Governor’s position is clear: put the Middle Class Tax Cuts Package on her desk. She will sign it. She will not sign other tax cuts for special interests and billionaires until Republicans show her how they’re going to pay for them.”