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Senate Passes Arizona's Budget and Tax-Cut

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Capitol Media Services photo by Howard Fischer
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Senators Kelly Townsend, with microphone, and Michelle Ugenti-Rita earlier this year during a floor debate

By Howard Fischer
Capitol Media Services

PHOENIX -- State senators approved plans for a new budget and tax cut early Wednesday morning after Gov. Doug Ducey agreed to some demands by Sen. Kelly Townsend, the lone holdout.

The Mesa Republican said the governor will rescind his declaration of a state of emergency he issued 15 months ago. 
 
That is designed to address concerns that Townsend -- and some other Republicans -- have voiced about Ducey's unilateral use of powers, particularly in the last half of 2020 when the legislature was absent.

In exchange, Townsend got some provisions inserted into the budget that codify some of the reasons Ducey said he needed those powers.

That includes, for example, a prohibition on cities and counties issuing their own emergency orders on things like mandatory masks or occupancy limits on businesses. The governor specifically said he used his emergency powers to preclude that.
The Senate also voted to partly repeals existing statutes that now allow the governor to order mandatory vaccinations of those with certain illnesses "or who are reasonably believed to have been exposed or may reasonably be expected to be exposed.'' Now the law will allow people to opt out based on religious objections.

Senators also approved a related proposal by Sen. Michelle Ugenti-Rita, R-Scottsdale, that limits future gubernatorial emergencies to no more than 120 days. Any extensions would have to be approved by the legislature, and only for 30 days at a time.

Now, once a governor declares an emergency it can last as long as he or she wants. Lawmakers can void the action with a simple majority vote. But that does no good if they are not at the Capitol, as it takes either a call by the governor or a two-thirds vote for a special session.
Townsend also got something else to become the necessary 16th vote for the budget package: creation of a special legislative panel to review the results of the audit currently being conducted by the Senate of the 2020 election in Maricopa County.

The report is not due back until at least August, long after the regular session is expected to be over. But Townsend said if this panel concludes changes are needed in state law, it could force Ducey to call a special legislative session later this year, enacting them in time to affect the 2022 election.

Townsend conceded she does not have an absolute commitment from the governor to issue such a call. But she said if he balked "it would not be politically expedient.''

"If he doesn't do it, it's a political time bomb,'' Townsend said.

There was no immediate response from the governor's office to either what Townsend said is his promise of rescinding his emergency declaration or calling a special session on election law changes."

The late-night action moves the debate to the House, but not until Thursday. 
 
That is because four GOP lawmakers are missing, leaving the chamber without a quorum after Democratic legislators refused to show up.

House Majority Leader Ben Toma, R-Peoria, says he has the necessary 31 votes -- all Republican -- to enact the plan once all of his members are in place.

The key bills in the budget package -- there are 11 of them -- all passed largely along party lines after the GOP majority rejected every change sought by Democrats.

Some proposal sought additional funding, like one by Sen. Christine Marsh, D-Phoenix, to appropriate more dollars to raise teacher salaries statewide. She said current wages are still not enough to keep qualified people in the classroom.

Also rejected were plans to put more dollars into school repairs.

Democrats had no better luck beating back policy changes that Republicans included in the budget package, like imposing $5,000 fines on schools that allow the teaching of lessons that suggest that members of some races are responsible for actions taken by others of the same race.

"Why is your discomfort more important than my history?'' asked Sen. Martin Quezada, D-Glendale.
GOP lawmakers also approved expansion of who is eligible to get vouchers of state funds to send children to private and parochial schools.

But the key debate was over the plan to permanently cut at least $1.3 billion in taxes -- and potentially up to $1.8 billion -- with those at the top of the income scale getting the biggest percentage cut in what they would otherwise owe.

Quezada told his GOP colleagues that they may live to regret their action.

"I'm going to get to vote 'no' on a budget that I believe is truly going to drive the nail in the coffin of the GOP dominance in the state of Arizona,'' he said. "Once the people of Arizona realize what is actually in this budget, once they see this welfare-for-the-wealthy budget, they are not going to be happy.''

The plan would eventually move state income tax rates from four steps ranging from 2.59 to 4.5% in steps, to a flat 2.5% flat tax rate. It also would protect the wealthiest Arizonans from the full impact of  Proposition 208, a voter-approved 3.5% surcharge on earnings over $500,000 a year to help fund education.
"The overwhelming majority of Arizonans are barely getting enough to fill a tank of gas while the wealthiest of Arizonans are getting enough to buy a new car,'' he said.
 
"It is a short-sighted effort to make the wealthiest Arizonans richer,'' said Senate Minority Leader Rebecca Rios, D-Phoenix.
But Sen. J.D. Mesnard, R-Chandler, said it makes sense that people who earn more and have higher taxes will get a bigger break. 
 
And he rejected the idea that voters won't like Republican policies, saying that 2020 was a "banner year'' for Republican legislatures nationwide based on their plans to curb taxes.

That wasn't exactly true in Arizona where Joe Biden outpolled Donald Trump, Democrat Mark Kelly defeated Republican Martha McSally for U.S. Senate and Republicans found their margin in the state House and Senate cut to just one vote.
But Mesnard said that last result was due to what he said were "gerrymandered'' districts crafted by the Independent Redistricting Commission.
Anyway, he said, the Republican-controlled legislature has a record of helping those at the bottom of the income scale.

Mesnard cited a 2019 law which provided for a standard deduction of $24,000 for married couples, meaning anyone making less than that owes absolutely no state income taxes. Prior to that the figure was $10,366.

He also said that, absent the changes in the law, Arizona would have the second-highest top tax bracket in the country at 8%, meaning the current 4.5% cap plus the 3.5% surcharge from Proposition 208. Only California would be higher.
"People vote with their feet,'' Mesnard said, citing the state's rapid population growth as proof of the popularity of having policies that cut taxes and limit regulations.

And Sen. Sonny Borrelli, R-Lake Havasu City, said the complaints of the Democrats smacks of class warfare.
"It seems kind of unfair to be attacking success in a system where we are a meritocracy, where you are actually rewarded for your efforts and you can actually pass on your successes to enrich other folks,'' he said.
The final budget does have a small victory for some consumers.

Ugenti-Rita got a clarification in the law to say that anyone whose vehicle registration expires on June 30 is not required to pay the $32 per vehicle registration fee.
That fee is set to self-destruct on that date. But the Department of Transportation took the position that even those who were buying new registrations effective July 1 had to pay it.
Her amendment ensures that the approximately 166,000 motorists who already paid the fee will get a refund.
 

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