What Does Arizona’s Income Tax Cut Mean For You?
One of the changes the new year has brought to Arizona is a new income tax plan, which took effect one full year ahead of schedule. And for most people in the state, it means they will get a tax cut.
The state now has a flat income tax rate of 2.5% for all residents. It replaces the previous system, a graduated income tax scale that ranged from 2.59% to 4.5% for a single person making over $159,000 a year.
A mixed reaction to the new plan
The new tax rate is the lowest flat tax in the country. So what does it mean for Arizona’s future? That depends on who you ask.
Governor Doug Ducey is a strong proponent of the plan and said it would benefit the economy.
“It’s time to deliver lasting tax relief to Arizona families and small businesses so they can keep more of their hard-earned money,” the governor wrote. “This tax relief keeps Arizona competitive and preserves our reputation as a jobs magnet and generator of opportunity.”
But critics argue the new tax mostly benefits the wealthy and that the average Arizona resident won’t see significant savings.
“If you’re making over half a million dollars a year, you get an average tax cut of over $16,000 annually,” said David Lujan, President and CEO of the Children’s Action Alliance. “A household with $70,000 a year gets a $58 annual tax cut.”
The legal battle comes to a close.
Ducey signed the bill authorizing the new tax plan last July, but opponents battled the implementation of it in court. A petition drive collected enough signatures to block the new plan until a vote in the November election. But the Arizona Supreme Court ruled that the state constitution does not allow tax legislation to be decided by voter referendum.
According to the governor, the new tax system could be implemented sooner than planned due to a strong economic performance that has given the state a $4 billion budget surplus through 2024. As a result, the new plan is expected to save taxpayers about $1.9 billion next year.
But Lojan and others worry that a recession could force the state to make steep spending cuts, similar to what happened after the Great Recession in 2007.
An experienced Arizona tax attorney can help you plan ahead
Time will tell how the plan impacts the state’s finances. But you can start thinking about how your financial situation will be affected. While the new flat tax could mean you get to keep more of your income, it's still important to plan ahead. A Mesa, AZ tax lawyer can help you protect your assets and prepare for the future.
An experienced attorney can create a plan to help you:
- Shelter assets and further reduce tax impacts through trusts and gifts
- Provide for the medical needs of family members
- Maximize your use of employer-provided insurance, benefit, and retirement plans.
Founded in 2014, The Law Firm of Brown & Jensen is a full-service firm that can help you with your long-term goals. Our attorneys have a thorough knowledge of state and federal tax law and can help you prepare an individual tax plan that meets your needs.
Contact us to schedule a consultation today. Serving clients in Mesa, Tucson, Scottsdale, Chandler, Peoria, Goodyear, Payson, and Show Low.