Assigned to FIN                                                                                                            FOR COMMITTEE

 

 

 

ARIZONA STATE SENATE

Phoenix, Arizona

 

FACT SHEET FOR H.B. 2616

 

income tax; eliminate marriage penalty

(NOW:  income tax; increase tax deduction)

 

Purpose

 

Retroactive to the tax year 2001, increases the standard deduction for individual income tax filers.

 

Background

 

The State of 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 1999-2000, state revenues derived from the individual income tax totaled approximately $2 billion.  The current rate structures range from 2.8 percent to 5.04 percent.

 

Currently, taxpayers who do not itemize their deductions are eligible for a standard deduction, which is $3,600 for single or married taxpayers filing separately and $7,200 for married taxpayers filing jointly or head of households.  H.B. 2616 increases the current standard deduction from $3,600 to $5,050 for single and married taxpayers filing separately and from $7,200 to $10,100 for married taxpayers filing jointly or a head of a household.

 

According to the Department of Revenue (DOR), this measure will reduce the state’s income tax revenue by approximately $50 million each fiscal year, for a net tax revenue reduction of $100 million over the FY 2001-2003 biennium.  The specific impact on each of the specific federal adjusted gross income (FAGI) levels are, as follows:

 

FAGI

HB 2616 Proposed

% change in tax liability

$  0 – 10,000

-70.8%

$  10,001 – 20,000

-19.7%

$  20,001 – 25,000

-16.0%

$  25,001 – 30,000

-11.6%

$  30,001 – 40,000

-7.8%

$  40,001 – 50,000

-4.7%

$  50,001 – 75,000

-1.7%

$  75,001 – 100,000

-0.5%

$  100,001 – 200,000

-0.2%

Over $200,001

No change

 

 

Provisions

 

1.      Increases the standard deduction, from $3,600 to $5,050, for single or married taxpayers filing separately.

 

2.      Increases the standard deduction, from $7,200 to $10,100, for married taxpayers filing jointly or a head of a household.

 

3.      Applies changes retroactively for taxable years starting on January 1, 2001.

 

House Action

 

WM                 2/17/01            DPA/SE           6-1-3-0

3rd Read           3/13/01                                    48-10-2-0

 

 

Prepared by Senate Staff

March 29, 2001