By Staff Reporter |
With Arizona’s legislative session scheduled to close this week, small business owners are still left in a lurch over a lack of tax conformity.
Twice this year Gov. Katie Hobbs has vetoed legislation that would have provided full conformity in the tax code with the One Big Beautiful Bill Act passed last summer. The governor maintains that the best path forward would not be full conformity, but rather partial.
Gov. Hobbs wanted the Republican-led legislature to get on board with the Democratic minority’s Middle Class Tax Cuts Package.
The Arizona Free Enterprise Club, a free market policy organization, said Hobbs’ preferred conformity package would require Arizonans to file taxes twice and increase taxes by $200 million.
That threat of double-filing, per Senate President Warren Petersen (R-LD14), has been mitigated because the tax forms sent out by the state aligned with what the Republicans brought to the table (and Hobbs rejected).
Prior to the first veto, the Arizona Department of Revenue issued its advice on filing under the new changes to federal tax law.
Republican leadership in the legislature urged Arizonans to file their taxes, promising to not support any conformity package that would effectively “punish Arizona taxpayers” and require refiling.
“For tax year 2025 we will not support anything that forces Arizonans to refile,” said Petersen.
“Any outcome that requires you to amend your return or pay more is a nonstarter,” said House Speaker Steve Montenegro (R-LD29).
Gov. Hobbs justified her vetoes under the claim that Trump’s One Big Beautiful Bill would require poorer Arizonans to shoulder more of the tax burden.
“We should not hold tax cuts for over 88 percent of Arizonans hostage in order to force through tax breaks for special interests,” said Hobbs. “Other questions of tax conformity must be decided through budget negotiations, following the precedent set by Governor Ducey.”
Budget negotiations have stalled as well.
Sen. Petersen rejected Hobbs’ view of the federal tax changes.
Petersen dismissed Hobbs’ claim as “a nice talking point” that ignored what he says is the reality of how the federal legislation impacts an overwhelming majority of the state’s business transactions.
“That’s just not true,” said Petersen. “We’re talking about tax on tips, we’re talking about tax on car interest loans, we’re talking about no overtime. These are not rich people. These are small business owners. 90 percent of business transactions are small business owners.”
Chad Heinrich, Arizona director of the National Federation of Independent Business (NFIB), told The Phoenix Business Journal that the lack of conformity will cause increased taxes on over 700,000 small businesses in Arizona. Heinrich blamed Hobbs.
“Not conforming with the key business provisions is, in practical effect, a tax increase on the Arizonans who can least absorb it — those who own and operate Arizona’s small businesses,” said Heinrich. “The Legislature has done its part. Governor Hobbs should finish the job, now, before one more small business owner has to guess about their future.”
AZ Free News is your #1 source for Arizona news and politics. You can send us news tips using this link.
