In an Executive Order issued earlier today, Arizona Governor Katie Hobbs took the first steps to cut state taxes for Arizona’s Senior and Middle Class residents.
In her order, called Cutting Taxes for Hard-Working Arizonans, designed to bring Arizona “in conformity” with the few tax cut measures that actually help the 98 percent contained in the Big Billionaires First Bill by enacting state equivalents, Hobbs is “directing the Arizona Department of Revenue to update State of Arizona tax forms to enable taxpayers to benefit from Governor Hobbs’ Middle Class Tax Cuts Package on their 2025 taxes.”
According to a Gubernatorial Press Release, these tax cuts include:
- Increasing the Standard Deduction on state tax forms from $15,000 to $15,750 for single filers, $31,500 for joint filers.
- Adding an additional $6,000 deduction for Arizonans over 65.
- Allowing Arizonans to deduct tipped income from taxes.
- Allowing Arizonans to deduct eligible overtime income from taxes.
- Allowing Arizonans to deduct interest for car loans on new, American-made vehicles from taxes.
In her press release, the Governor called on the State Legislature to pass her package of Middle Class Tax Cuts, stating:
“I’m proudly working to deliver this tax cut for middle class Arizonans. Arizona must provide relief for families who are seeing the cost of living increasing and struggling just to get by. While I’ve taken this important step to cut taxes for the middle class, there’s still more work to be done. I encourage the legislature to join with me to immediately codify my Middle Class Tax Cuts Package to increase the standard deduction, support our seniors and allow everyday Arizonans to benefit from tax deductions on tips, overtime, and car loan interest when paying their state taxes.”
“It’s vital that we cut taxes for the middle class and create certainty for the vast majority of Arizona taxpayers by passing the Middle Class Tax Cuts Package immediately in the new year. Arizonans are relying on us to provide tax relief, ease the cost of living crisis, and deliver certainty during the upcoming tax season.”
On social media, the Governor and her team posted:
Arizona Legislative Democrats issued a joint press release applauding the Governors plan to cut taxes for the Middle Class with the understanding that vital programs like public education and health care will not be fiscally compromised.
Senate Democratic Leader Priya Sundareshan wrote:
“The Republican federal budget bill continues to have devastating impacts on state budgets, Arizona included. On top of that, Donald Trump’s tariffs have amounted to one of the largest tax increases in American history, raising the cost of groceries, clothing, and other items that Americans need to survive.
Governor Hobbs’ directive today proposes new tax cuts intended to support middle class Arizonans during a time when Republicans at the federal level have increased costs on all Americans.
At the same time, decades of Republican tax cuts in Arizona have benefitted billionaires and corporations while underfunding necessary public functions and have led to $1 billion annually lost to private school vouchers.
Senate Democrats welcome the upcoming discussions on how to reduce costs for working class Arizonans without harming the funding they rely on for public education, healthcare, and more.”
Senate Finance Committee Ranking Democrat Former Senate Democratic Leader Mitzi Epstein commented:
“Arizonans who are struggling deserve help. Arizona Legislative Democrats are committed to providing real help, not just sound bites. Republicans in Congress pushed HR1 to give benefits to billionaires and add $4 trillion of debt in the next decade. At the state level we cannot do that; it’s irresponsible. New tax cuts will be costly, and we are tasked with paying for them. Every tax cut to one group is a tax increase to another group. Legislative Democrats are committed to fighting for fairness that uplifts working families and I believe we can negotiate a plan with the Governor that does not come at the expense of those families.”
House Democratic Leader Oscar De Los Santos offered:
“While Republican politicians cause price hikes and healthcare cuts, Democrats are stepping up with real solutions to make life affordable for everyday Arizona families. Today Governor Hobbs released a middle-class tax package that cuts taxes for seniors on fixed incomes, boosts affordability for workers by letting them keep more of their overtime pay, and eliminates taxes on tips.
House Democrats are ready to deliver this tax relief — and we will ensure it’s done responsibly and not paid for with cuts to services for working families or the middle class. We will not gut healthcare. We will not slash public education. If Republicans want to protect the powerful special interests instead of the people, they can do it alone — Democrats are here to fight for Arizona’s working and middle-class families every single day.”
House Ways and Means Ranking Member Representative Seth Blattman stated:
“Republican policies have driven up costs for all Arizonans and affordability is the number one concern of every person I talk to. These middle and working-class tax cuts take real steps toward addressing the affordability crisis for working families. As long as we don’t cut education, healthcare, or other vital services to pay for them, I am cautiously optimistic that this plan can work and make a difference for the people we represent.”
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I hesitate to disagree, but cutting taxes is not something the Gov can do alone. Tax code reforms (or in this case conforming changes to the Arizona tax code to federal changes) require legislation. I suspect this is just an attempt to get the AZ Lege to play along and ONLY enact those changes we Democrats are OK with. But that’s not going to work. Hobbs will need to stand firm to VETO any tax change that goes beyond her EO outline in order to enforce her ‘suggestion’. If she does not make it ABSOLUTELY clear now there will be no signature on the budget without enacting ONLY the changes Dems prefer, then the MAGAts will ABSOLUTELY pass them all. Full conformity will cost the state coffers abourt $1.4 billion through ’29 and devastate key services, which has MAGAs salivating. Hobbs has not demonstrated, to date, a willingness to to stand fully behind any budget veto threat and put her political life on the line for it. I am deeply skeptical of her ability to do now in an election year. Hope I’ll be surprised.