Arizona Lawmakers Face Tax Cut Conformity and Prop 123 Extension Debate

As Arizona lawmakers prepare to reconvene, they are met with crucial decisions on tax policy and education funding. While school vouchers aren’t initially on the agenda, both political parties are maneuvering to bring them into the conversation.

Addressing Tax Policy

With the legislative session approaching, conformity with federal tax cuts stands as a significant issue. Earlier this year, President Trump’s major tax reductions led Democratic Gov. Katie Hobbs to propose similar tax cuts for Arizona’s middle-class families, aligning with parts of the federal approach.

However, Gov. Hobbs stopped short of endorsing all federal tax cuts, a stance contested by Republicans like State Sen. John Kavanagh (R-Fountain Hills). Kavanagh insists on full state conformity, stating, “The governor wants to do just individual tax breaks, which is about $220 million, and the Republicans would like to do the full $440 million, which includes businesses.”

Republicans argue that differing tax cuts at the state and federal levels could create confusion for taxpayers, making it a priority for the legislative agenda. Meanwhile, Gov. Hobbs has suggested reducing funding for the Empowerment Scholarship Accounts to offset revenue losses, a proposal that Republicans are unlikely to support.

Navigating Prop. 123

The upcoming session also requires a resolution on extending Proposition 123, a measure critical for funding public schools through state land trust revenue. Failure to send it to voters previously resulted in significant expenditures by lawmakers.

Sen. Kavanagh emphasizes the urgency, stating, “We didn’t send it to the voters for renewal and we had to backfill it. We don’t want to do that again this year, but a lot of members want to have some protections for ESAs, along with that Prop. 123, which goes to district schools.”

The debate centers on whether the Proposition 123 extension should include provisions for private school vouchers. Democrats prefer these issues remain separate, while Republicans are inclined to make the extension contingent upon stronger legal protections for the Empowerment Scholarship Accounts.