Tag: budget

3 Things to Know About Arizona’s Budget

Arizona’s new $18.3 billion budget includes important improvements that will help families, but it still falls short of the long-term investments needed to address the affordability crisis and build a stronger state economy. 

Arizona families need more than tax-cut headlines. They need a budget that fully funds health care, child care, and public K-12 schools — a budget that keeps food on the table, lowers everyday costs, and builds an economy that works for all Arizonans, not just those with the most power and influence. 

Here are three things to know. 

1. The budget avoids some of the worst harms proposed earlier this year. 

The final budget is a meaningful improvement over the proposal vetoed earlier this year. It protects AHCCCS coverage for an estimated 40,000 Arizonans, extends some food assistance and school meals, invests in child care, and pauses new data center tax giveaways for three years. 

Those improvements matter. They will help families meet basic needs and show that lawmakers can make better long-term choices when there is enough pressure to protect families from harm. 

The three-year moratorium on new data center tax giveaways is especially significant. At a time when many states are continuing to expand tax breaks for large corporations, Arizona is taking an important step by pausing a giveaway that deserves far more scrutiny. 

But the moratorium also shows the limits of this budget. It is expected to protect about $57 million through 2029 — important revenue, but small compared with the scale of Arizona’s long-term budget challenges and the $1.45 billion tax package included in this budget. It is a meaningful win, but it is not a substitute for a broader shift in how Arizona approaches tax policy. 

2. The budget still falls short of meeting Arizona’s affordability crisis. 

Avoiding harm is not the same as meeting the moment. 

Arizona families are still struggling with the high cost of groceries, rent, child care, health care, utilities, and gas. While the budget includes some helpful investments, it does not do enough to lower everyday costs or provide the sustained support families need. 

Nearly 500,000 Arizonans have lost SNAP food assistance, and this budget does not do enough to mitigate the harm to families and the state economy as a result. That means many households will continue to face the grocery checkout line with less help than they need. 

The budget also will not solve the housing crisis, permanently lower the cost of child care, or provide the sustained investments Arizona’s public K-12 schools need. Short-term funding can help, but it does not replace the long-term commitment required to make Arizona more affordable for families. 

3. Lawmakers continue to give away revenue through tax policies that benefit corporations and the wealthy. 

Some middle-class tax provisions in the budget may provide temporary relief. But the larger tax package continues Arizona’s long-running pattern of giving away revenue through tax policies that disproportionately benefit corporations and the wealthy. 

The budget includes about $1.45 billion in tax relief over four years. That is a major long-term choice. While families receive smaller, temporary investments to help with rising costs, hundreds of millions of dollars will continue flowing through tax policies that benefit those who need help the least. 

That choice has consequences. 

For years, Arizona has cut revenue and then asked families, schools, health care providers, and communities to make do with less. Arizona has lost nearly $11 billion to tax cuts over the past 30 years, while the state’s tax system remains one of the most regressive in the nation. 

The state cannot keep cutting the revenue needed to fully fund child care, public K-12 education, health care, housing, water, and food assistance and still expect to build a strong, competitive economy. 

Those investments are not optional. They are the foundation of whether parents can work, whether businesses can hire, whether families can afford to stay in their communities, and whether Arizona can grow in a way that is sustainable. 

The bottom line 

This budget includes real improvements: Protecting health care, extending food assistance and school meals, investing in child care, and pausing new data center tax giveaways will help families avoid some of the worst harms proposed earlier this year. 

But policymakers had an opportunity to do much more. A responsible budget should build the revenue needed to support affordability, opportunity, and the long-term economic future of our state — not rely on tax-cut headlines while families continue to struggle with everyday costs. 

Arizona Budget Includes Improvements But Falls Short of Meeting the Affordability Crisis

Statement from Geraldine Miranda, Assistant Director of Fiscal Policy, Arizona Center for Economic Progress

PHOENIX —  “This budget includes important improvements that will help Arizona families, but it still falls short of the long-term investments needed to address the affordability crisis and build a stronger state economy.  

“Arizona families need more than tax-cut headlines. They need a budget that fully funds health care, child care, and K-12 public schools — a budget that keeps food on the table, lowers everyday costs, and builds an economy that works for all Arizonans, not just those with the most power and influence. 

“This budget includes important steps toward that goal. Protecting AHCCCS coverage, extending food assistance and school meals, investing in child care, and pausing new data center tax giveaways for three years will avoid some of the worst harms proposed earlier this year. 

“But avoiding harm is not the same as meeting the moment. Arizona had an opportunity to do much more to address the affordability crisis and strengthen the long-term health of our economy. 

“This budget does not do enough to help restore SNAP benefits to the hundreds of thousands of eligible Arizonans who have lost food assistance. It will not solve the housing crisis, permanently lower the cost of child care, or provide the sustained investments Arizona’s public K-12 schools need. While some middle-class tax provisions may provide temporary relief, Arizona continues to give away hundreds of millions of dollars through tax policies that disproportionately benefit corporations and the wealthy. 

“The three-year moratorium on new data center tax giveaways is significant: At a time when many states are continuing to expand tax breaks for large corporations, Arizona is taking an important step by pausing a giveaway that deserves far more scrutiny. But we should also be clear: The moratorium protects a relatively small amount of revenue compared with the scale of Arizona’s long-term budget challenges. It is a meaningful win, but it is not a substitute for a broader shift in how Arizona approaches tax policy. 

“For years, Arizona has cut revenue and then asked families, schools, health care providers, and communities to make do with less. That approach has consequences. We cannot keep cutting the revenue needed to fully fund child care, public K-12 education, health care, housing, water, and food assistance and still expect to build a strong, competitive economy. 

“Those investments are not optional. They are the foundation of whether parents can work, whether businesses can hire, whether families can afford to stay in their communities, and whether Arizona can grow in a way that is sustainable. 

“This budget shows that lawmakers can make better long-term choices when there is enough pressure to protect families from harm. A responsible budget should build the revenue needed to support affordability, opportunity, and the long-term economic future of our state.” 

Arizona’s Budget Is Stuck. Here’s a Way to Move Forward. 

Arizona lawmakers are at an impasse. 

The Legislature passed a budget. The governor vetoed it. And now, instead of a clear path forward, we’re left with the same debate that has stalled progress for years: how to balance the budget while families across the state struggle with rising costs. 

At some point, this conversation needs a reality check. 

For too long, Arizona has treated tax cuts as the default strategy — assuming they will magically produce growth, attract business, and solve economic challenges. But budgets are not built on magic. They are built on math. 

And right now, the math doesn’t add up. 

The good news? There is a path forward. In fact, there’s a pretty clear recipe lawmakers could follow right now — one that would help families, strengthen the economy, and actually make the budget work. 

Step 1: Invest in what actually helps families 

If lawmakers are serious about affordability, there’s one policy that should be at the top of the list: a fully refundable Child Tax Credit. 

It’s an evidence-based policy that delivers real relief to families dealing with the everyday costs of raising kids and one of the most effective anti-poverty tools. 

Expanding Arizona’s current credit to $250 per child and making it fully refundable would cost roughly an additional $200 million a year. Arizona could choose to make the credit even more generous than $250 per child. To help contain the cost, lawmakers could focus the benefit more directly on low- and moderate-income families by lowering the income level at which the credit begins to phase out.   

The state could also meet the moment by investing in rental and utility assistance — policies that are highly effective for households under immense stress and prudent countercyclical tools during an extended period of economic uncertainty. 

Arizona needs policies that match the scale of the challenge, and it needs the revenue to fund them. 

Step 2: Stop leaving money on the table 

Arizona’s tax code isn’t neutral. It’s full of policy decisions — many of them expensive — that reduce revenue in ways that disproportionately benefit corporations and the wealthiest households. 

If lawmakers are looking for a way out of this budget standoff, they don’t need to start from scratch. They can start by rethinking a few of those choices.i 

Rethink capital gains giveaways 

Unlike most states, Arizona allows a special deduction on long-term capital gains — a benefit that largely goes to high-income households who are more likely to report income from capital gains. This can lead to an even further regressive tax system in which working families and wealthy households face different tax burdens.  

For instance, a taxpayer who reported in income solely from capital gains on assets purchased after 2011 would pay an effective tax rate of 1.875%, as compared to a person who reports solely wage income and pays 2.5%, setting aside all other deductions.  

Economists have grown concerned that capital gains in the U.S. often reflect growing inequality and income from nonproductive outcomes, including asset bubbles or anticompetitive corporate power.  

The repeal of this special deduction could potentially generate meaningful revenue as Arizona taxpayers reported over $24 billion in net capital gains in tax year 2022, of which about 87.5% were reported by households making over $200,000.  

Ask the most profitable corporations to contribute more 

Arizona could create a higher tax bracket on in-state corporate profits over $10 million — something many states already do. Corporate profits have grown as share of gross domestic product, meaning more of the gains in the economy are going to capital instead of labor.  

Increasing the corporate income tax rate on firms that report high levels of Arizona income could likely generate more than $200 million annually.  

Reevaluate tax breaks that may no longer make sense 

Arizona has offered generous tax incentives to industries like data centers — even as those projects put growing pressure on water and energy resources. 

At the same time, industry trends show these types of companies are choosing locations based on infrastructure and energy access — not tax breaks. 

In FY 2025, this tax expenditure cost Arizona nearly $40 million and is on a trajectory to continue to grow.  

That’s real money that could be reinvested in the communities. 

Close gaps and modernize the system 

There are also straightforward ways to strengthen Arizona’s tax base without harming economic activity, including: 

  • Modestly increasing the corporate minimum tax $50 to $250  
  • Updating outdated provisions across the code 

These aren’t radical ideas. They’re rational and equitable ways to generate revenue and support economically productive state investments. 

Increase the severance tax on copper mining 

Many states have some form of royalty or severance tax on the extraction of minerals or oil and gas. New Mexico has utilized its oil-and-gas revenue to help support its child care investment. Arizona currently has a severance tax on metalliferous mining (e.g., copper). The price of copper has increased significantly due to its importance in new technologies such as artificial intelligence.  

 A severance tax, compared to a royalty or gross receipts tax, is generally less disruptive to business activity because it is tied more closely to profits and production value rather than simply taxing total sales. 

A slightly higher severance tax (0.5% to 1%  higher) could raise more tax revenue to invest in roads, water, child care, or a refundable child tax credit.  

Step 3: Take a hard look at the flat tax 

If lawmakers are serious about solving the structural budget problem, they can’t ignore the biggest factor: the flat tax. 

Arizona’s flat income tax has significantly reduced state revenue — by as much as $2.6 billion if fully reversed.  

Even a partial adjustment — like applying higher rates only to incomes above $250,000 — could generate hundreds of millions of dollars. 

And despite the promises, there’s little evidence it has delivered the kind of economic growth it was supposed to. 

What it has done is limit Arizona’s ability to invest in the fundamentals that actually drive economic strength: 

  • Child care  
  • Public K-12 education  
  • Health care  
  • Infrastructure  
This is the reality check 

Arizona’s budget debate isn’t stuck because there are no options. 

It’s stuck because the state has been relying on the same approach — cutting revenue and hoping for a different result. 

That’s not a strategy. It’s a gamble. 

And right now, it’s a gamble that’s leaving families to absorb rising costs during an affordability crisis without the support they need. 

The way forward is clear 

Lawmakers don’t need a breakthrough idea to move forward. They need to make different choices. 

The  is already there: 

  • Invest in policies that directly lower costs for families  
  • Rebalance a tax code that is currently tilted toward the top  
  • Restore the state’s ability to fund the building blocks of a strong economy  

A refundable Child Tax Credit is a good place to start. 

Because when families are more financially stable, the entire economy benefits — businesses grow, communities strengthen, and the state becomes more resilient. 

The bottom line 

Arizona isn’t out of options. It’s just time to use them.

5 Things Arizona Must Get Right in Next Round of Budget Negotiations

Arizona’s budget debate just hit a reset button. 

With the Republican budget proposal vetoed, state leaders now have a second chance — not just to negotiate numbers, but to build a budget that better reflects the realities facing Arizonans today. 

Earlier this year, both the governor and legislative leaders put forward proposals that offer different approaches to the state’s priorities. But the path forward will depend on what policymakers choose to carry forward — and what they choose to do differently. 

The Republican proposal made clear how difficult it is to meet the state’s needs within the constraints created by years of revenue cuts and continued pressure to reduce taxes.  

At the same time, the governor’s proposal highlighted a different set of choices — including efforts to more directly address ongoing costs and limit some of the drivers of long-term spending. 

As negotiations move into a second round, the focus should be less on comparing proposals and more on building a budget that actually works for Arizona families. 

Here’s what that requires: 

1. Start with household reality — not tax policy 
Budgets should reflect what Arizonans are experiencing every day: rising housing costs, expensive child care, strained health systems, and economic uncertainty. 

2. Fund ongoing needs with ongoing dollars 
One-time funding cannot continue to carry long-term obligations. Stable investments are essential for programs families rely on. 

3. Plan for real costs and real risks 
From federal policy changes to administrative demands, the next budget should be grounded in realistic assumptions — not best-case scenarios. 

4. Protect the state’s long-term fiscal capacity 
With limited dollars available, decisions about revenue matter. Policymakers should carefully weigh the long-term impact of additional tax reductions against the state’s ability to meet core needs. 

5. Prioritize investments that strengthen economic stability 
Investments in education, health care, housing, and workforce systems deliver lasting returns — for families and for the state’s economy. 

Arizona doesn’t just need another round of negotiations. 

It needs a budget that reflects the moment — and makes the most of this second opportunity to get it right. 

Read the full analysis

Arizona’s Budget Reset: Lessons from Round 1, Priorities for Round 2 

Arizona’s budget debate is entering a new phase. 

With the Republican proposal vetoed, state leaders now have another opportunity to craft a budget that better aligns with Arizona’s fiscal realities and the needs of its residents. 

Earlier proposals from the governor and legislative leaders offered different approaches to the state’s priorities, particularly when it comes to managing limited revenue and addressing growing costs.  

This analysis examines those proposals to identify where key gaps remain and what policymakers should consider as they move into the next round of negotiations. 

Budget proposals still fall short of what most Arizonans need 

Over the last 30 years, policy choices that cut about $11 billion of revenue have done almost nothing to ease the economic worries felt by most Arizonans. Instead, repeated tax cuts have only made it tougher for the state to invest in public programs and services proven to make life more affordable for Arizonans, including education, child care, housing assistance, health care, and food support.  

Recent tax cuts passed by Congress in H.R. 1 exacerbate the situation by taking more money away from working families and giving it to the wealthy. 

If policymakers truly want to address affordability, Arizona cannot afford to continue reducing the revenue needed to fund essential services and long-term investments. With limited dollars available, the state budget should prioritize making strategic use of existing resources while considering responsible ways to strengthen revenue over time. 

This year’s budget debate reflects those constraints. With only $378 million available General Fund dollars, both proposals relied on difficult tradeoffs and creative funding mechanisms to support priorities. 

The key question moving forward is not simply what each proposal funds, but whether those investments are enough to meet the long-term needs of Arizona families and communities. 

Lessons from Round 1 

The first round of budget proposals highlighted several recurring challenges: ongoing needs funded with one-time dollars, rising costs without sustainable revenue, and growing pressure from recent federal policy changes. As negotiations continue, these issues remain unresolved. 

Formula driven costs 

Both proposals included some funding needed for essential services whose costs require annual adjustments based on growth.  

This means:  

  • Health care for individuals with developmental disabilities: The governor’s budget adds $128 million to cover this year’s shortfall while Republicans’ proposal included $97 million. Only the governor’s budget provides the $226 million ongoing cost needs beginning FY2027.  
  • Food assistance: Both proposals accounted for the increased state share of SNAP administrative costs required under H.R. 1 — $33 million this year and $44 million ongoing. However, neither proposal accounted for the additional state costs Arizona is likely to face under H.R. 1’s SNAP error rate penalty structure. Arizona’s historic payment error rate has consistently remained above the 6% threshold required to avoid additional cost-sharing penalties. As a result, the state is unlikely to qualify for a $0 cost obligation under the new law. A more realistic budget projection should account for an estimated $139 million additional cost to the state. 
  • Public K-12 education: While both proposals fund education, only the governor’s proposal includes a renewal of Proposition 123. Her proposal would reduce the current General Fund backfill by $271 million, allowing for these funds to be allocated to other critical needs. Both budgets added back $37 million for the poverty weight and $29 million for additional assistance. These two items were temporarily cut from the ongoing budget from FYs 2025-2027. Proposals differed when it came to the Empowerment Scholarship Accounts (ESAs) that are part of the K-12 education formula costs. Only the Republicans’ proposal continued to allow this program to grow to the projected 109,000 students, bringing ESAs to a total cost of $1.2 billion. The governor’s plan requires reforms to curb excessive and inappropriate use. ESA costs have grown far beyond initial projections largely because the majority of students added through the 2022 universal expansion — about 61% — did not previously attend public schools. Rather than shifting existing education costs, the expansion created significant new costs for the state’s General Fund. To better target the program toward families with greater financial need, the governor’s proposal would limit eligibility to households earning $250,000 or less annually, an estimated savings of about $90 million. The Republicans’ proposal also opted Arizona into the H.R. 1 Federal Voucher program adding further strain to public school funding. Because school funding follows the student, if more students leave public schools, it will be harder to sustain funding for fixed costs for things like buildings and buses for students who remain.  
One-time ongoing needs 

In the last few years, policymakers have funded several ongoing vital programs and services with one-time money — a bad habit continued in current budget proposals with even fewer items funded than even during the recent budget deficit in FYs 2024-2025.  

Investments (inadequately) included:  

  • H.R. 1 support for AHCCCS and SNAP: Only the governor’s proposal includes support to agencies grappling with the implementation of H.R. 1 red tape for the SNAP and AHCCCS/Medicaid programs. Her budget includes one-time funds of $14.4 million for AHCCCS and $16.6 million for SNAP.  A month before H.R. 1 passed, the federal government cut funding used for SNAP and unemployment insurance eligibility workers in Arizona — resulting in more than 400 laid off. Then, SNAP work requirements and the race to obtain a less than 6% error rate began as soon as H.R. 1 was signed in July. While the governor provided $7.5 million in American Rescue Plan Act dollars to hire temporary workers in December, it hasn’t been enough as more than 450,000 Arizonans have lost access to food assistance since July, the highest loss in the nation. The Republicans’ proposal added unfunded mandates for SNAP and Medicaid. Their budget required the Department of Economic Security to lower the SNAP error rate to an impossible 3% and AHCCCS to do quarterly income checks without more funding for staff and other supports. Even worse, it cut DES' budget by $10 million and AHCCCS by $11 million. Similar to H.R. 1, the Republican budget is balanced on Arizonans being cut off from these programs. 
  • School buildings: Both budget proposals continue adding one-time funding for school buildings. Republicans’ plan added $183 million, and the governor’s plan adds $93 million with $1.5 billion over three years through a Prop 123 renewal. While the governor’s budget would provide more funding, it’s not entirely clear if it’s sustainable. Yet both are far from what is needed. A recent lawsuit ruling said the state should be investing ongoing funds of more than $400 million. 

  • State employee health insurance: The State Employee Health Insurance provides health care to about 136,000 state employees. Since the state swept funding from the Health Insurance Trust Fund (HITF) during the Great Recession, it has experienced shortfalls that have been covered with unsustainable one-time funding. This year, Republican legislators proposed adding a one-time fund of $232 million and increasing employee contributions by 21%. The governor’s budget ensures one-time funding for this year and next of $173 million and $219 million. She also adds $719 million of ongoing funding over the next three years. The state budget should be able to sustainably and fully fund state employee health insurance instead of relying on one-time spending.  
  • Child care: Both budget proposals continued the $45 million one-time investment from last year. While this is the highest amount the state has invested in more than a decade, it still falls short from what is truly needed. Due to unexpected federal funding cuts, the $45 million failed to meet its goal of reducing the child care waitlist by 50%. Adding the same amount this year would only maintain the current level of access to the program. Arizona should be investing ongoing funding of $160 million, though the actual amount may be even higher to fully support working families and get the greatest return on investment. 

  • School meals: While both proposals included continuing a one-time investment in children who qualify for reduced priced school meals, the Republicans’ plan reduced the traditionally budgeted amount of $3.8 million down to $2 million. This investment should amount to ongoing funding of$4.5 million. Only the governor's budget includes funding for the SUN Bucks program with a small, one-time state investment of $1.8 million for FYs 2026 and 2027, which draws down $157 million in federal funding. SUN Bucks provides food assistance to children during the summer if they qualify for free and reduced-priced school meals. If we truly want to make the best use of our limited General Fund dollars, this investment in children and families should be included in our budget of ongoing funding. 

Investments missing:  

  • Housing Assistance: Neither budget included funding for housing assistance nor additional deposits to the Housing Trust Fund (HTF). On the contrary, the Republicans’ budget swept $14.4 million from the HTF. We should be investing at least $50 million in housing assistance to help families avoid or recover from homelessness. 
  • Promise Program: Unlike prior years, funding for the Promise Program didn’t appear in either proposal. The Promise Program pays tuition for first-time students to attend one of the state’s public universities. The last few budgets added $16 million to $20 million on top of the ongoing $20 million already included.  
  • Transportation: Transportation is another priority in recent budgets that failed to make the cut in both proposals, even despite legislators considering about $107 million worth of projects this session. Last year, Arizona invested $109 million in transportation projects.  

Revenue proposals 

The spending side of current budget proposals failed to meet or prioritize the bare minimum required to meet the needs of Arizonans. These budget proposals invested even less in Arizonans than during the recent deficit crisis in 2025. However, both budgets included creative and even harmful means of increasing the $378 million revenue available — only this time to primarily fund more costly tax cuts.  

H.R. 1 tax cuts 

  • Last summer Congress passed H.R. 1, a law that financed massive tax breaks with cuts to essential health care and food assistance programs. When the federal government cuts taxes, states must decide whether they will adopt these changes. Given new and high cost shifts to states from H.R. 1, states are bracing for these budget pressures, so none has fully adopted all H.R. 1 tax cuts. Yet, both budget proposals in Arizona prioritized forgoing hundreds of millions in revenue to match H.R. 1 cuts. The Republican legislators proposed a full match for the first year — a minimum $441 million cost this FY 2026. Beginning in FY 2027, the proposal would have eliminated the senior, State and Local Tax (SALT), and auto loan interest deductions and replace them with a $25 increase to dependent credits, along with new deductions for child and dependent care expenses, retirement and pension income, and Roth IRA contributions — changes estimated to reduce state revenue by roughly $1 billion between FY 2027 and FY 2029. The governor’s proposal only matches a few H.R. 1 tax changes: standard, senior, tips and overtime deductions. Since all but the standard deduction are set to expire after tax year 2028, these temporary tax cuts would cost $692 million from FY2026 through 2028.   

Revenue raisers 

  • Tax exemption and credit repeals: To free up more revenue to balance the budget, both proposals included repealing a few prior tax cuts. The governor’s budget removes the tax exemption for data-center equipment that would raise revenue at least $39 million every year. Republican legislators proposed repealing seven tax credits that would free up about $77 million in ongoing funds.  
  • Fee increases: The governor’s budget also includes a fee increase for sports betting that her office estimates could bring in about $520 million over the next three years. This was not included in the Republicans’ proposal.  

Funding tricks and cuts 

  • Fund Transfers: Similar to FY 2025, the Republicans’ proposal sought to sweep money from state funds to balance the budget. In 2025, policymakers transferred $776 million from almost 100 state funds. This year Republicans considered transferring $360 million one-time funds from 28 state funds, including:  
    • $27 million from rural transportation
    • $25 million from university technology and research initiatives
    • $14 million from the Housing Trust Fund
    • $7 million from utility regulation  

Much of the money that was proposed for transfer has already been spent or obligated to original intentions.  

  • 5% Agency Cuts: Republicans also proposed 5% across-the-board cuts to 56 state agencies to gain ongoing funds of $99 million. Agencies are still dealing with $39 million cuts to balance the FY 2024 and 2025 budgets. If these 5% cuts had gone through, agencies like the Department of Economic Security (DES), would have lost $10 million on top of the $3 million cut in 2025. This amount is almost as much as DES needs for staff to implement H.R. 1 changes to SNAP.  
  • Clawbacks: Republicans’ proposal planned to lapse funding for 11 items, including graduate medical education, a teacher-development pilot program, and transitional and reentry housing — taking back a one-time fund of $26 million.  
A history of tax cuts that limit budget options 

The two budget proposals only fully funded a few formula-based needs while cherry-picking a few one-time items from recent years that require ongoing funding. These limited and short-sighted plans are the result of insufficient revenue after over 30 years of tax cuts.  

Since the 1992 passage of Proposition 108, a policy that requires a two-thirds legislative approval for raising revenue; state policymakers have cut revenue almost every year. This policy has made it nearly impossible to repeal tax cuts when the state budget needs revenue, resulting in about $11 billion lost since it became law.  

About $7 billion of total revenue losses have come from changes to the individual income tax alone with the flat tax as the biggest culprit, draining about $3.3 billion in just three years.  

More tax cuts are NOT the best bang for our buck 

Despite decades of tax cuts, most Arizonans are struggling to afford basic necessities today more than ever. Tax cuts have failed to ease economic anxieties and limited our budget’s ability to truly invest in essential programs and services that support the economic well-being for individuals, families, and Arizona as a whole.  

With our limited revenue situation, every dollar spent and cut from our budget should be carefully considered. Tax cuts may sound good — like the deductions being considered for tips, overtime, child/dependent care, and retirement/pension. However, they are actually poorly targeted to benefit the wealthy few and unreachable for those who need the most support. But is a revenue cut that benefits a few worth more than ensuring our child care program is fully funded?? 

Given our current inability to adequately invest in schools, transportation, and other essential needs that benefit most, we need to rethink our view of taxes if we truly want to make life more affordable for all of us. Taxes are something we should all see as fulling our duty to ensure our state budget can invest in things that make Arizona a place to build thriving communities and better economic opportunities for all Arizonans.   

Arizona Legislature Needs Reality Check on Budget Proposal

This op-ed was published in The Arizona Republic on May 11, 2026.

Arizona’s budget debate is stuck in a place that no longer reflects reality.

For years, state lawmakers have treated tax cuts as a default strategy, arguing that they will magically produce growth, attract business and solve economic challenges. But budgets are not built on magic. They are built on math. And right now, the math doesn't add up.

The latest budget proposal makes that clear. The state is facing real constraints, yet instead of addressing the revenue shortfall, lawmakers are doubling down on the same approach: cutting taxes and hoping for a different result.

That is not a strategy. It is a gamble Arizona can no longer afford.

Cutting taxes cuts funding for strong economy

At its core, this is a simple dollar-and-cents issue. You cannot cut revenue year after year and still expect to fund the basic building blocks of a strong economy. And those building blocks are affordability, family wealth building and the very investments that make Arizona competitive.

Child care.

Public K-12 education.

Health care.

Housing.

Water.

These are not optional line items. They are the foundation of whether people can work, whether businesses can hire and whether communities can grow.

When childcare is unaffordable, parents leave the workforce. When public K-12 schools are underfunded, businesses struggle to find an educated workforce. When health care is out of reach, productivity declines and costs rise elsewhere. When housing costs spike, workers can’t live where the jobs are. When water infrastructure is uncertain, long-term economic planning becomes impossible.

This is not theoretical or philosophical. It is the economy.

And yet, Arizona continues to move in the opposite direction — shrinking the very revenue needed to sustain these systems. Over the past 30 years, Arizona has lost nearly $11 billion to tax cuts; our tax system remains one of the most regressive in the nation.

Who benefits from flat tax rate?

The flat income tax is a prime example. It was sold as a way to drive growth and make Arizona more competitive. But in practice, it has overwhelmingly benefited the wealthiest households while draining billions from the state’s ability to invest in its own future. Even a partial adjustment — like applying higher rates only to incomes above $250,000 — could generate hundreds of millions of dollars.

Tax breaks for large corporations are often justified as necessary to attract business. But businesses do not choose locations based on tax rates alone. They choose places where they can find skilled workers, reliable infrastructure and a high quality of life for employees.

In other words, they choose places that invest in the community.

We need to change our thinking

Arizona risks undermining its own economic case. A low-tax environment does not mean much if the workforce is underprepared, if families cannot afford to live and work here, or if essential systems are stretched too thin.

This is where the conversation needs to shift — from narrow ideology to reality. Because the current path leads to a cycle that is hard to break: declining revenue, reduced services, greater strain on families and ultimately a weaker economy. That is not growth for Arizona’s future. That is erosion as deep as the Grand Canyon.

What makes a responsible state budget?

A responsible budget requires balance. It requires recognizing that revenue is not a burden — it is the mechanism that makes everything else possible. It is what allows a state to educate its workforce, support its families, and create the conditions businesses need to succeed. Before the Great Recession, the state made significant investments in affordable childcare and all-day kindergarten, policies that not only help working families but also boost future productivity.

This is not about politics. It is about priorities and basic arithmetic.

Arizona’s leaders need to have a reality check. Continuing to pursue tax cuts without a plan to equitably sustain revenue is not fiscally responsible. It is fiscally shortsighted.

If Arizona wants a strong economy in the years ahead, we must be willing to invest in it. That begins with acknowledging a simple reality: You cannot build a thriving state without the revenue to support it.

This op-ed was published in The Arizona Republic on May 11, 2026.

New Research: Stricter SNAP Eligibility Rules Don’t Increase Employment — but Do Increase Hardship 

A new report from the Hamilton Project at the Brookings Institution adds to a growing body of evidence: Stricter SNAP eligibility rules around work do not meaningfully increase employment, but they do reduce access to food assistance. 

Researchers reviewed multiple economic studies that used rigorous, quasi-experimental methods to isolate the impact of these policies. Across those studies, the findings are consistent. Stricter SNAP eligibility rules around work do not lead to sustained employment gains. Instead, they result in a significant drop in SNAP participation. 

In other words, the primary outcome is not more people working — it is fewer people receiving help. 

What changed under recent federal policy 

These findings come at a critical moment for Arizona. 

H.R. 1 made significant changes to SNAP — expanding who is subject to stricter eligibility rules while limiting states’ ability to respond to local economic conditions. 

SNAP eligibility requirements operate in two main ways: 

  • General Requirements apply to most adults ages 16–59 (with certain exemptions). These include registering for work, accepting suitable employment, and not voluntarily reducing work hours below 30 per week without good cause. 
  • Stricter Requirements for Adults Without Dependents (ABAWDs) impose tighter limits. Individuals can only receive SNAP for three months unless they meet additional conditions, such as working or participating in approved activities for at least 80 hours per month. 

H.R. 1 expanded these restrictions significantly: 

  • Extending the age range from 18-59 to 18-64  
  • Eliminating key exemptions for individuals experiencing homelessness, veterans, and young adults aging out of foster care  
  • Applying these stricter rules to some adults with dependents ages 14-18  

At the same time, the law sharply limited area-level waivers, which previously allowed states to suspend these requirements in areas without sufficient job opportunities. 

Prior to these changes, nearly every county in Arizona qualified for a waiver. Today, only Yuma County does. 

Who these policies actually affect 

These policies are often framed as targeting individuals who are not working. In practice, they frequently impact people with unstable and inconsistent employment — workers with fluctuating hours, seasonal jobs, or caregiving responsibilities. 

These are individuals who are already navigating economic uncertainty. 

When benefits are cut off, the consequences ripple quickly. Households that are income- and credit-constrained may fall behind on rent, miss utility payments, or take on debt. That, in turn, can increase the risk of eviction, financial instability, and even job loss. 

Rather than promoting stability, stricter SNAP eligibility rules can end up making it harder for families to stay afloat. 

Arizona already seeing the impact 

These policy changes are taking effect as Arizona is already experiencing a sharp decline in SNAP participation. 

Between July 2025 and March 2026, the state lost nearly half of its SNAP participants — the largest decline in the nation. That loss reflects not improved economic stability but reduced access to assistance during a time of unaffordability. 

At the same time, broader economic signals point to growing strain. Arizona’s unemployment rate has increased to 4.7 percent, and many households continue to face high costs for housing, food, and utilities. 

While top-line indicators — such as strong investment in artificial intelligence, elevated asset prices, and spending among higher-income households — may suggest economic strength, they can mask deeper fragility for low- and moderate-income families. 

A policy that can weaken the economy 

The effects extend beyond individual households. 

When families lose SNAP, they lose purchasing power — not just for food, but for other essentials. That reduction in spending can slow local economies, reduce tax revenues, and increase demand for other public services. 

At a time when many households are already struggling, these policies risk increasing economic fragility — especially during a slowdown. 

AZCenter has previously highlighted how limiting state flexibility, including the loss of area-level waivers, could weaken Arizona’s ability to respond to economic downturns. The latest evidence reinforces that concern. 

Fewer benefits, not more opportunity 

The takeaway is clear. 

These stricter eligibility rules do not significantly increase employment. But they do increase hardship — by cutting off access to food assistance for people who are often already working or trying to find stable work. 

As Arizona continues to see steep declines in SNAP participation, these policies risk accelerating a trend that is already putting pressure on families and communities across the state. 

The consequences of these policies don’t stop at food access. When families lose SNAP, they lose the ability to stay current on rent, utilities, and other essentials — pushing more households toward eviction. That connection is already playing out in Arizona, where steep SNAP losses are colliding with a growing eviction crisis. Read more. 

Statement on proposed Republican budget by Arizona Center for Economic Progress Director Joseph Palomino 

Joseph Palomino, director of the Arizona Center for Economic Progress released the following statement Tuesday:

"There is one thing that is clear from the proposed budget dropped by the Legislature this week: The wells of revenue have run dry, and while the proposal doubles down on ill-targeted and costly tax cuts, such policies are a mirage that neither meaningfully address affordability or work to equitably grow our economy.  

"The budget includes significant cuts to agencies, such as the Department of Economic Security. That choice is reckless and irresponsible as DES navigates the bureaucratic burden of H.R. 1 that has already seen 450,000 Arizonans lose their SNAP benefits. Moreover, the budget includes dangerous SNAP restrictions and unnecessary requirements such as reducing the state’s payment error rate to 3% without additional resources to do so.  

"The budget does little for families struggling with housing and utilities and simply maintains a child care investment that is merely a trickle of what the state needs to help families and get people working.  

"The budget is an import of bad federal fiscal policy that drains Arizona’s coffers and makes Arizona’s economy less dynamic while those struggling the most are left with little opportunity and resources.  

"It’s a budget that dries up hope as the dust storm of bad zero-sum federal policy (tariffs, ICE raids, increasing federal deficits to pay for tax cuts for the wealthiest) eclipses the state and national economy.  

"Arizona’s future is no longer a question of stopping bad tax cuts; it’s an imperative to implement good tax policy.  

"To do so will require a reality check and responsible action by lawmakers to reverse the flat individual income tax that has primarily benefited the wealthiest Arizonans and has failed to grow our state’s economy.  

"Arizona needs real, people-first investments in K-12 public education, health care, housing, child care, and water to drive growth for the long term so everyone can benefit. And it needs the revenue to do so."