PHOENIX — A Democratic proposal to create a new tax credit for working low-income Arizonans that Republican Gov. Doug Ducey adopted as part of his budget proposal was approved by an Arizona Senate committee Wednesday.
The proposal from Sen. Sean Bowie, a Phoenix Democrat, did not make it out of the Finance Committee with the full support of majority Republicans. GOP Sens. Vince Leach and Michelle Ugenti-Rita opposed the measure, a sign that the proposal could have a difficult time in the narrowly divided Legislature.
But Bowie said he’s optimistic, noting that it passed the Senate on a 26-3 vote last session before stalling in the House. And he said its inclusion in the governor’s new spending plan could sway him to give the budget a rare Democratic vote.
“I like the chances. I mean, I liked the governor’s budget proposal a lot,” Bowie said. “If we’re able to do this … and it’s included in the budget, that would go a long way towards getting me on the budget.”
The $74 million plan is the first tax proposal the governor has backed in his eight legislative sessions that specifically aims to benefit lower-income workers. Tax cuts Ducey has championed, including a nearly $2 billion income tax cut passed last year, have instead mainly flowed to businesses or the wealthy.
The Earned Income Tax Credit proposal mirrors the federal credit, which provides refunds to the working poor. It sets the credit at 5% of the federal amount, and the average family would get $128 per year. A family with three children would get more than $300 a year.
The proposal would benefit about 577,000 taxpayers, according to the governor’s office.
The idea is to provide extra cash to working families who could use the money for food, utilities, gas and other necessities. And Bowie said that money would flow right back into the economy.
“It’s been a very effective measure to reduce poverty throughout the country,” Bowie told the committee, with the federal credit lifting 5.6 million Americans out of poverty. “It’s something that can really help a lot of families throughout the state.”
The proposal didn’t sit well with Leach, who said the tax credits were a move toward the government providing basic income for everyone, an idea championed by some progressives that Bowie said he does not support.
“This gets precariously close, one step closer, to guaranteed income, which is floating around again,” Leach said. “And I think we should all be concerned about that.”
A lobbyist for the Free Enterprise Club, an advocacy group that backs limited government and lower taxes, said the proposal forces some taxpayers to subsidize others.
“The Legislature should never be considering refundable tax credits,” lobbyist Amy Yentes told the panel. “We’ve opposed this for very large businesses, special interests industries … and we oppose it in this form, too, as basically straight welfare.”
The committee’s 7-2 vote sends the bill to the full Senate for consideration.
The Senate Finance Committee also approved a property tax cut for most business property. The cut from Republican Sen. J.D. Mesnard adds to a proposal enacted last year that phased in rate cuts from 18% of assessed valuation to 16% in 2025.
The new proposal cuts another percent off the full assessed value that is used to assess business property such as telecommunications facilities and shopping centers. Business interest groups have long argued that Arizona’s business property taxes are too high.