Arizona’s tax code is upside-down. Instead of asking corporations and the wealthy to pay what they owe, the lowest-income households pay twice what the top 1 percent pays as a share of their income. This is unjust and withholds the revenue that Arizona needs to provide quality education, ensure access to health care, and make housing affordable for more residents.
While elected leaders have continued to cut taxes year after year—creating more tax breaks for the wealthiest households and corporations—Arizonans are demanding long-term, overdue, and necessary investments to create an economy that works for everyone. Instead of another round of giveaways, Arizona should be looking toward its future and making sure there is enough revenue to pay for important priorities.
WHERE THE AZCENTER STANDS:
The Arizona Center for Economic Progress fights for a tax code where everyone pays what they owe. By creating a progressive tax structure, Arizona could make desperately needed investments in communities and services that have been sidelined. Elected officials can take steps toward tax and economic justice by rejecting new tax cuts, credits, and exemptions.
HERE IS HOW THE NEXT GOVERNOR AND STATE LEGISLATURE CAN ACCOMPLISH THIS:
Increase taxes paid as a share of income for higher-income households and adopt a more graduated income tax structure (repeal the flat tax!) – Those that earn less should not pay a greater share of their income in taxes than the wealthiest Arizonans. Yet that’s the opposite of what the 2.5% “flat tax” accomplished when it was passed into law in 2021, with 60 percent of the benefits going to the top 5 percent of households (those making over $248,000 annually), and 80 percent of the benefits going to white households. Arizona’s elected officials should re-institute progressive tax brackets that require wealthy households to pay a greater share of their income.
Increase the minimum corporate tax – For years, elected officials have slanted Arizona’s tax system in favor of wealthy corporations. Today, more than 7 in 10 corporations in Arizona owe only $50 in taxes annually (before credits). This has resulted in growing carryforward balances (tax refund IOUs to corporations) that threaten state revenues for years to come. If individuals pay taxes through their paychecks and/or at the register, corporations should do the same.
No new credits for the wealthy and corporations, and institute stronger oversight and accountability for all tax credits – In addition to reducing tax rates for corporations and the wealthy, Arizona has also significantly expanded tax credits which offset tax bills (or even refunds). Yet, issues with tax credits include a lack of accountability, poorly targeting, uncertainty of their effectiveness, long-term (unintended) impacts, and competition with other state programs for resources. Arizona’s elected officials should refrain from enacting new credits for the wealthy and corporations and institute real accountability and oversight of existing tax credits.