Arizona House Republicans and Governor Katie Hobbs (D-AZ) are locked in a dispute over tax relief, with Rep. Steve Montenegro (R-AZ) accusing the governor of abandoning her campaign promises on affordability.
The conflict centers on a Republican-backed tax plan that would have returned $1.1 billion to Arizona taxpayers over three years. Governor Hobbs vetoed the measure in less than 24 hours after it passed the legislature.
House Republican leader Montenegro pointed to what he sees as a contradiction between the governor's words and actions.
"Arizona has two Katie Hobbs," Montenegro said in a statement. "Candidate Katie Hobbs said the word “affordability” 14 times in her State of the State address on Jan. 12. Governor Katie Hobbs vetoed affordability by Jan. 16.”
He argued that the state's growing revenues, which are up nearly $3.5 billion over the past five years, should be returned to residents during what he called an affordability crisis.
The tax conformity legislation contained several provisions aimed at working families and small businesses:
- Elimination of taxes on tips and overtime pay
- Increased child tax credit
- New deductions for childcare expenses
- Simplified filing for small businesses
- Deductions for retirement income to help seniors
According to Montenegro, Republicans introduced the plan before the legislative session even began, after the governor declined to join them for a special session in November.
The Veto and Competing Plans
Governor Hobbs vetoed the Republican bill the following day, announcing her own tax plan. Her alternative proposal included $650 million in new taxes and fees, according to Montenegro.
"House Republicans want Arizonans to live well. Governor Hobbs wants the government to live well," Montenegro stated.
Hobbs defended her veto, arguing the Republican plan favored wealthy corporations and would raise taxes on working seniors.
She introduced her own "Middle Class Tax Cuts" bill with Democratic legislative leaders that includes raising the standard deduction, ending taxes on overtime and tips, and increasing relief for seniors.
Tax Form Confusion
Montenegro raised concerns about tax forms already issued by the state Department of Revenue.
He claims the forms contain a state and local tax (SALT) deduction that primarily benefits wealthy taxpayers, a provision Republicans say they removed from their plan in favor of larger credits for families with children.
"The Hobbs tax forms now in circulation and already being used by filers still contain this so-called tax cut for billionaires," Montenegro said. "Had the governor signed our legislation, the Department of Revenue would already be working to remove it."
With tax season already underway, taxpayers have just three months to file their returns.
The standoff leaves Arizona taxpayers in limbo as the April filing deadline approaches. Both sides claim their plan better serves middle-class families, but no compromise appears close.
