Arizona House Republicans announced passage of a state budget proposal this week, saying it delivers significant tax relief while reducing overall spending compared to Governor Katie Hobbs’ plan.
In a press release, House GOP leaders said the budget includes what they described as one of the largest tax cuts in Arizona history while maintaining funding for core government services.
The proposal has advanced through a series of budget-related bills in the House and Senate, including House Bill 4140, which implements key components of the fiscal year 2026–2027 budget.
According to the release, the proposal is designed to provide cost-of-living relief for families, seniors, workers, and small businesses and would spend approximately $800 million less than Hobbs’ budget.
Republican lawmakers said the plan maintains a balanced budget while prioritizing affordability, drawing a contrast with Hobbs’s budget plan.
“Arizona Republicans are delivering one of the largest tax cuts in state history, and our proposal has the votes to pass both chambers,” Arizona Senate President Warren Petersen (R-LD14) said in a statement.
“For months, Governor Hobbs told us full conformity to federal tax relief, including tax cuts for tipped workers, hourly employees, seniors, and small business owners, was impossible. It’s not,” he continued. “Under President Trump, Washington delivered relief for working Americans, and Arizona Republicans are making sure our taxpayers receive those same Trump tax cuts here at home. Republicans balanced the budget with honest numbers, protected core priorities, and provided real relief for families still struggling with higher costs. Arizona is leading the nation as the only state we are aware of advancing the full Trump tax cuts into law. Despite the Governor’s stunts, Republicans stayed at work and got the job done for our citizens.”
The budget proposal comes amid an ongoing policy dispute between the Republican-controlled legislature and the governor over taxes and spending priorities. Earlier in the session, Republican leaders advanced tax proposals they described as among the largest in state history, while Hobbs outlined a separate approach focused on targeted relief and new revenue mechanisms.
Arizona House Speaker Steve Montenegro (R-LD29) said in a statement, “House and Senate Republicans put forward a serious budget built on facts, not wishful thinking.”
He added, “It delivers major tax relief, eases cost pressures on Arizona families, fully funds core state services, and spends far less than the Governor’s proposal. It does not rely on gimmicks, inflated projections, or money that may never show up to balance the budget. In divided government, responsible leadership means facing the math, making hard choices, and protecting taxpayers. Republicans have done that, putting a workable budget on the table and giving Arizona a clear path to finish the session responsibly. The proposal is ready to move, and so is the Legislature. It is time to pass the bills and deliver for Arizona.”
In a post on X, Montenegro and Petersen said the proposal delivers tax relief, reduces spending, and fully funds core state services.
Arizona Republicans are delivering a serious, balanced budget for our state that spends about $800 million less than Governor Hobbs’ plan.
This plan cuts taxes, lowers costs for families, and fully funds the core services Arizonans rely on, all while staying within a responsible… pic.twitter.com/cRxSfV4nJ6
— Arizona House Republicans (@AZHouseGOP) April 27, 2026
Additional details on specific tax provisions and final budget allocations are expected to be addressed as the proposal moves through the legislative process and negotiations continue with the governor’s office.
On Monday, House Republicans put forth what they called a balanced budget of $17.9 billion.
By Tuesday, Gov. Katie Hobbs said the proposal was all but dead.
The leaders of both chambers characterized their budget as uniquely reflective of total conformity with federal tax law — no other states adopted the entire slate of tax cuts — which Hobbs doubted could be accomplished. They estimated tax relief would amount to $1.5 billion over the next three years, and Republicans claim working families would feel the most benefit from the cuts.
“Politics are easy; governing is harder. We chose governing,” said Sen. President Warren Petersen (R-LD14). “We’re moving a budget that cuts taxes, funds core services, shrinks government, includes priorities both sides have raised, and gives Arizona a full path to finish the session.”
As budget talks have failed to progress in a meaningful way, the legislature stagnates under the weight of a bill moratorium.
In a statement issued Tuesday, Hobbs did acknowledge Republicans for working with her to adopt certain components of her preferred budget like middle class tax cuts and reductions to childcare cost. However, she disputed Republican leaders on their claims of fiscal responsibility.
She accused Republicans of siding with “billionaires, data centers, and special interests” as well as “kicking Arizonans off their healthcare and taking food off their tables.” The governor said she won’t engage in negotiations further unless they adopt her preferred budget.
Contentious aspects of the Republican-proposed budget included cuts to state agency budgets, and SNAP and Medicaid program funding.
“Until they also engage in good-faith negotiations rather than attempting to force through a partisan budget, I will be closely monitoring the situation in the coming days to determine whether the legislative majority is willing to negotiate in good-faith bipartisan negotiations and have the bill moratorium lifted,” said Hobbs.
NEW: @GovernorHobbs reacts to the newly released Republican budget: “Just like in Washington, they’re paying for tax breaks for billionaires, data centers and special interests by kicking Arizonans off their healthcare and taking food off their tables.” pic.twitter.com/8UlFIqa5S1
Hobbs also discussed the budget talks during a press conference for a separate topic on Tuesday, Reentry 2030. Hobbs tentatively praised Republicans for some concessions on their part, but generally was critical of them for balking at her $18.7 billion spending plan. A key part of that plan Hobbs hopes to win through in budget talks concerns draining the public land trust to boost K-12 education funding.
“I’m glad to see the Republicans have shown their budget proposal, there’s some things I’m encouraged about in their proposal, but across-the-board agency cuts is not one of them,” said Hobbs. “I’m hopeful that we can get back to the table and start having real conversations about a budget that works for Arizona.”
Legislative leaders have said Hobbs’ proposal is a nonstarter because the Public Land Trust was intended for long-term funding. Hobbs’ plan intends to renew funding through the yet-approved Proposition 123. Senate President Petersen said Hobbs’ plan wasn’t feasible and would push the state $1.5 million further into debt.
“We’re spending about $800 million less than what the governor has proposed, and the governor has proposed to raise taxes,” said House Speaker Montenegro (R-LD29) in an interview with Fox News.
“[H]er math doesn’t work,” said Petersen.
Hobbs has vetoed tax conformity efforts and walked away from budget negotiations multiple times since the start of the year.
The legislature began hearing budget bills on Tuesday during a joint hearing of the Senate and House Appropriations Committees.
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Arizona’s job growth has fallen behind national trends over the past year, with the state recording a net loss of jobs and rising unemployment, according to a new report from Republicans on the Joint Economic Committee.
The February employment update for Arizona found the state added approximately 11,000 jobs month-over-month, but posted a net loss of about 300 jobs over the previous 12 months.
The report ranked Arizona 24th in the nation for job growth during that period.
Arizona’s unemployment rate rose to 4.6 percent, up from 4.2 percent one year earlier, while the state’s labor force participation rate declined to 61.7 percent, down 0.4 percentage points year-over-year.
Nationally, the labor market continued to expand, with U.S. payrolls increasing by roughly 178,000 jobs in March, while the national unemployment rate remained lower at approximately 4.3 percent.
The report indicates Arizona’s recent performance has lagged the national pace on several key labor metrics, including year-over-year job growth and unemployment trends.
At the same time, the data shows continued monthly job gains in Arizona, reflecting ongoing hiring activity despite weaker longer-term growth.
Other analyses have also pointed to slowing job growth in the state. A December 2025 update from the Common Sense Institute found Arizona’s job growth had moderated significantly compared to earlier post-pandemic years.
Separately, the Arizona Chamber Foundation reported that job growth in 2025 was minimal following revisions to earlier employment data.
Conversely, state officials have highlighted other economic indicators in recent months. Governor Katie Hobbs’ office cited a report ranking Arizona second nationally in overall economic performance, which includes measures such as population growth, domestic migration, and gross domestic product.
The Joint Economic Committee report focuses specifically on labor market conditions, including employment levels, unemployment, and workforce participation.
Congressman Abraham Hamadeh (R-AZ-08) announced his letter to Secretary of Veterans Affairs Doug Collins to adopt common-sense reforms to the VA Home Loan Guarantee Program.
The goal is to eliminate outdated bureaucratic hurdles, reduce unnecessary costs, and better align the program with today’s competitive housing market so more young veterans can achieve the American Dream of homeownership.
In a formal letter to Secretary Collins, Congressman Hamadeh highlighted the Trump administration’s strong progress in refocusing the Department of Veterans Affairs on its core mission: delivering timely benefits, expanding access to quality care, slashing the claims backlog, and eliminating waste. Building on that momentum, Hamadeh expressed confidence that practical improvements to the home loan program will receive serious consideration.
“As my fellow veteran and Committee member, Congressman Van Orden said in our hearing on the subject, we must find ways to eliminate the unnecessary administrative costs of the VA Home Loan program and better align it with other Federal housing programs,” said Congressman Hamadeh. “My family is in real estate. I am very familiar with housing, and I know the unintended consequences of bureaucratic policies that have little to no protective value and ignore the realities of the marketplace.”
Congressman Hamadeh’s recommendations focus on four key areas where the VA Home Loan program lags behind other federal housing programs, such as FHA and USDA loans:
Ending Origination Fee Stacking: VA rules cap lender origination and administrative fees at 1% of the loan amount, intended to cover all lender labor and overhead. However, veterans report lenders charging the full 1% while adding separate itemized fees for processing, underwriting, and other services. This practice amounts to an unfair cash grab that increases costs for veterans and should be strictly enforced.
Modernizing Underwriting Process: The VA continues to rely heavily on manual underwriting, resulting in average closing times of about 10 business days. In contrast, the FHA has implemented semi-automated systems that can approve straightforward loans in as little as 2 to 7 days. The Mortgage Bankers Association has testified that automated underwriting would accelerate the process and help reduce the perception that VA loans are slower and more cumbersome.
Raising the Seller Concessions Cap: The VA currently limits seller concessions to 4% of the home’s reasonable value. Both FHA and USDA programs allow up to 6%. In competitive markets, this 2-percentage point difference can mean the difference between a veteran’s offer being accepted or denied.
Addressing Appraiser Shortages Through Reasonable Certification Requirements: The VA has identified 436 counties in 31 states facing appraiser shortages that delay loans and drive up costs. A major contributor is the VA’s stringent experience requirement of 3 to 5 years for certification, compared to just 12 to 18 months for FHA and USDA programs. Aligning standards would increase the pool of qualified appraisers, shortening waiting times and lowering fees.
These targeted reforms would remove barriers without compromising program integrity, helping young veterans secure homes more efficiently and affordably. By modernizing the program, VA can better fulfill its promise to those men and women who have sacrificed for our country.
Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.
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.
File your taxes twice. Pay more. Welcome to Katie Hobbs’ Arizona.
After vetoing two full conformity bills, Hobbs helped turn what should have been a routine tax update into a full-blown mess in the middle of filing season. Her administration issued forms based on full… pic.twitter.com/eS5n6tiWfm
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.”
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.”
“It’s a nice talking point, but it’s really not true.”
Arizona Senate President Warren Petersen joined @AZMorningNews to push back on Gov. Katie Hobbs after she vetoed Arizona tax conformity and tax-cut bills tied to federal changes.
Chad Heinrich, Arizona director of the National Federation of Independent Business (NFIB), toldThe 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.
The National Federation of Independent Business (NFIB) released a new report detailing the significant economic benefits and tax savings Arizona’s 706,640 small businesses will realize now that the 20% Small Business Tax Deduction has been made permanent.
The report also outlines additional federal tax relief measures signed into law that will support small business growth across the state.
According to the report, making the deduction permanent is projected to generate 26,000 new jobs annually in Arizona over the next 10 years, along with an annual increase in state GDP of $1.4 billion during the first decade. After 2035, the benefits grow even larger, with an expected $2.9 billion annual increase in state GDP and 49,000 new jobs created each year.
Nationally, the permanent deduction is expected to add 1.2 million jobs and $75 billion to U.S. GDP each year for the first 10 years, rising to 2.4 million jobs and $150 billion in annual GDP growth beyond 2035.
“Making the 20% Small Business Deduction permanent was a landmark win for Main Street — and Arizona small businesses are already seeing that benefit,” stated NFIB State Director Chad Heinrich. “But the conformity fight isn’t over, and every provision Arizona fails to adopt is a tax increase on hardworking small business owners.”
Since 2017, the Small Business Tax Deduction has allowed pass-through businesses to deduct up to 20% of their qualified business income. This relief has enabled small businesses to expand operations, hire more workers, invest in employees, and strengthen their communities. The deduction was originally scheduled to expire at the end of 2025, which would have resulted in a significant tax increase on nine out of ten small businesses.
On July 4, 2025, President Trump signed legislation making the 20% Small Business Tax Deduction permanent. This action provides long-term certainty for small business owners, allowing them to retain more of their earnings to reinvest in their operations rather than sending additional funds to federal and state governments. It also helps level the competitive playing field against larger corporations.
In addition to the 20% deduction, the legislation includes several other key provisions. The Section 179 small-business expense deduction was doubled from $1.25 million to $2.5 million and will now be indexed for inflation, allowing businesses to immediately deduct the full cost of qualifying equipment and property.
The 100% bonus depreciation under Section 168(k) was permanently restored, enabling businesses to fully deduct the cost of qualified property in the year it is placed in service rather than spreading depreciation over many years.
Lastly, the estate tax exemption was permanently increased to $15 million for individuals and $30 million for married couples filing jointly, with inflation adjustments. This change helps family-owned small businesses avoid being forced to sell or liquidate assets to pay taxes upon the owner’s death.
Ethan Faverino is a reporter for AZ Free News. You can send him news tips using this link.
