House of Representatives

HB 2125

individual income tax rate reduction

Sponsors: Representative May

 

DPA

Committee on Ways and Means  REVISED

w/d

Committee on Appropriations

dpa

Caucus and COW

 

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As Passed the House

HB 2125 provides a reduction in the tax rate for individual income beginning in taxable year 2001.

History

Arizona imposes a progressive income tax rate on individuals with taxable income in this state and upon nonresidents who derive their income from sources within Arizona. In Arizona, annual individual income tax accounts for approximately one-third of all state general fund revenues.  For FY 99-00 the state revenues for individual income tax is approximately 2 billion. 

 

In the 1990’s several individual income tax rate reductions have taken place.  Laws 1992 Chapter 290 increased the personal and dependent exemption amounts from $2,000 to 2,100 and over 65 exemption from $1,500 to $1,750.  Laws 1993, Second Special Session, Chapter 9 again increased the dependent and 65 and over exemptions, to $2,300 and $2,100, respectively.  The legislation also accelerated the deductibility of medical expenses for tax years 1993, 1994 and 1995.  At the time, the 1993 individual income tax changes were projected to decrease annual general fund collections by $10.6 million.

 

In both 1994 and 1995 rate reductions were enacted.  The combination of the two measures reduces the individual income tax liability of all taxpayers by approximately 20 per cent.  At the time, the 1994 enactment (Chapter 41) was projected to reduce annual state collections by $106.9 million. 

 

In addition to the rate reduction, the 1995 enactment (First Special Session, Chapter 9) eliminated the income tax liability for a family of four with an income of $20,000 or less by establishing a family income tax credit and increasing the standard deduction amounts.  The 1995 enactment was a $200 million tax cut. In 1998 a two-year phase-in of a $50 million cut to the personal income tax was passed.  The first phase included an increase in the family tax credit from $30 to $40 for each member in the family and allowing six family members to qualify for the credit. The second phase provided a rate reduction across the income tax brackets and an increase in the dependent exemption.

 

 

 

The current rate structure is as follows:

Single or Married filing separately:

Taxable Income                                    The tax is:

$0 - $10,000                                        2.8% of taxable income

$10,001 - $25,000                               $287, plus 3.2% of the excess of $10,000

$25,001 - $50,000                               $767, plus 3.74% of the excess over $25,000

$50,001 - $150,000                             $1,702, plus 4.72% of the excess over $50,000

$150,001 and over                               $6,422, plus 5.04% of the excess over $150,000

Married filing joint or Single Head of Household:

Taxable Income                                    The tax is:

$0 - $20,000                                        2.87% of taxable income

$20,001 - $50,000                               $574, plus 3.2% of the excess over $20,000

$50,001 - $100,000                             $1,534, plus 3.74% of the excess over $50,000

$100,001 - $300,000                           $3,404 plus 4.72% of the excess over $100,000

$300,001 and over                               $12,844 plus 5.04% of the excess over $300,000

 

Provisions

·        Beginning with the tax year 2001, provides a change to the individual income tax rate that has yet to be determined.

HB 2125 was amended in the Ways and Means Committee as follows:

·        Provides the changes to the individual income tax rates that will result in a $50M savings to taxpayers.

·        The changes are as follows:

If taxable income is:   The tax is:

$0 - $10,000            2.8% of taxable income

$10,001 - $25,000       $280, plus 3.13% of the excess over $10,000

$25,001 - $50,000       $749, plus 3.67% of the excess over $25,000

$50,001 - $150,000      $1,667, plus 4.65% of the excess over $50,000

$150,001 and over       $6,317, plus 4.97% of the excess over $150,000

In the case of a married couple filing a joint return or a single person who is a head of a household:

If taxable income is:   The tax is:

$0 - $20,000            2.8% of taxable income

$20,001 - $50,000       $560, plus 3.13% of the excess over $20,000

$50,001 - $100,000      $1,498, plus 3.67% of the excess over $50,000

$100,001 - $300,000     $3,334, plus 4.65% of the excess over $100,000

$300,001 and over       $12,634, plus 4.97% of the excess over $300,000

 

HB 2125 passed the House of Representatives as amended with the provisions listed above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

 

 

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45th Legislature                                                                                                                                

First Regular Session                                   3                                                         March 13, 2001

 

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