Personal Income Tax Rates
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Rep. Laura Knaperek speaks during a news conference on taxes Jan. 11. |
Issue Overview: In the 1990s, Arizona taxpayers witnessed individual income tax cuts. This proved to be extremely beneficial for small businesses which are paying their business taxes on their individual income tax returns. These efforts also helped employees of both large and small businesses.
Currently, there are 19 states that have lower personal income tax rates than Arizona. And, there are nine states that do not have an income tax, including Nevada. In Arizona, there are five income tax brackets -- 2.87 percent, 3.20 percent, 3.74 percent, 4.72 percent and 5.04 percent.
Contrary to popular belief, Arizona is not a low-taxed state. As Bob Robb pointed out in his Arizona Republic column (Dec. 11, 2005), "Cut state income tax and start counting cash," Arizona had the seventh-highest tax burden in the country prior to the 1990s. The tax cuts of the 1990s, he stated, have been washed away by the subsequent state and local sales tax increases.
Rep. Laura Knaperek is sponsoring HB 2489, a bill that reduces the personal income tax rates by 10 percent over two years. Please see the chart below for the rate reductions:
Legislative Budget Committee (JLBC) estimates the fiscal impact at $155.5 million for FY 2007, and $333.6 million for FY 2008.
HB 2489 also reduces the corporate income tax rate by 10 percent over two years. For more information on this part of the bill, please see the link to the right of this screen, "Reduce the Corporate Income Tax Rate in Arizona."
NFIB Position: NFIB/Arizona supports a reduction in the personal income tax rate. Most small businesses have forms of organization in which company net income is attributed to the owners and taxed as personal income, not subject to the corporate income tax.
Issue Status: A reduction in the personal income tax was included in the FY 2007 budget package. It is a 10 percent rate reduction over two years. The personal income tax cut was approved by the legislature and signed by the Governor.
What to Do: Please thank lawmakers and the governor for supporting an income tax cut.
