Arizona has been recognized by a national legislative group as one of six states that enacted major tax relief in 2019.
The analysis, State Tax Cut Roundup, by the American Legislative Exchange Council found that Arizona reduced 2020 tax liability by an estimated $680 million.
“Arizona eliminated the second lowest of its five total tax brackets, allowing more income to fall into the bracket with the lowest rate,” the analysis states. “Arizona lowered personal income tax rates for three of the four remaining tax brackets. Finally, Arizona also established a tax credit of $100 for every dependent under 17 years of age and $25 for every dependent older than 17.”
Arizona and Virginia were ranked “Best of the Best” in tax relief. Both states used changes in federal taxes as an opportunity to cut state taxes as well rather than to receive a revenue windfall, the report said.
“While both states were initially slow movers on the issue of federal tax conformity, their conformity legislation successfully clarified their respective state tax codes following the landmark federal Tax Cuts and Jobs Act reforms and also returned effective state-level revenue increases back to taxpayers through significant personal income tax reforms,” the report said.
If Arizona had enacted federal tax changes without any corresponding state changes, taxpayers would have seen annual tax increases "exceeding $236 million,” the analysis said.
“While many states decided to pocket this additional revenue to fund increased government spending, Arizona decided it would be put to better use back in taxpayers’ pockets," the analysis states.
Other states highlighted in the report for tax relief were Florida, North Carolina, Tennessee and West Virginia. This is Arizona’s fifth appearance in the State Tax Cut Roundup, with only Florida and North Carolina making the list more often.
“Overall, the economic evidence strongly suggests states with lower tax burdens and more economic freedom regularly outperform their higher taxing, more restrictive counterparts,” the report said. “Creating a tax and fiscal policy climate conducive to economic growth should be a top priority for every state.”