As expected, Gov. Katie Hobbs is not blinking in the tax cuts battle with Republicans in the Legislature, vetoing a second tax conformity bill Thursday.
In a veto letter, Hobbs said she will sign legislation only if it includes her preferred tax conformity plan, known as the Middle Class Tax Cuts Package.
“Again, I urge you to stop the partisan political theater,” Hobbs wrote. “Anything more than the Middle Class Tax Cuts Package must be negotiated through the budget process.”
However, the two bills introduced by Democrats that contain her tax plan do not align with the tax forms issued by the Department of Revenue. House Bill 2758 (conformity; internal revenue code; deductions), from Republicans, would have aligned with those forms to prevent taxpayers from being required to file amended returns.
It is unclear whether or not the Governor’s Office and lawmakers are negotiating a compromise tax conformity plan. Hobbs’ budget director, Ben Henderson, sent a letter to Senate President Warren Petersen and House Speaker Steve Montenegro in early February saying he would clear his schedule to discuss the issue with them.
“The Governor’s Office has been in frequent communication with lawmakers for weeks,” said Liliana Soto, Hobbs’ press secretary, in a statement. “Governor Hobbs is clear: We must put middle-class families first. If Republicans want more, they need to show how they’ll pay for it without risking vital services for Arizonans.”
Kevin McCarthy, the president of the Arizona Tax Research Association, told the Yellow Sheet Report that he doesn’t expect to see any other version of the tax conformity bill this year. HB2785 was the only measure the association supported because it is consistent with the Department of Revenue’s tax forms and McCarthy said he supports a solution that’s the simplest for taxpayers.
“I can’t imagine what version three would look like,” McCarthy said. “I think we’ll go through the end of April 15 without a resolution to this because we’re in the mode, regrettably of late, of not doing the budget until close to May and sometimes into June.”