Arizona’s Republican‑led Legislature is moving forward with a major tax plan expected to deliver at least $1.1 billion in taxpayer savings over the next three years, but a policy analyst says the actual benefit could be substantially larger when federal tax rules are considered.
According to Glenn Farley, director of policy and research at the Common Sense Institute Arizona, the savings figure grows when factoring in the state’s adoption of the federal SALT (state and local tax) deduction. Arizona allows taxpayers to subtract state and local taxes paid from their income, mirroring a key feature of the 2017 Tax Cuts and Jobs Act. Farley explained that because Arizona’s income tax system closely follows the federal system, residents benefit twice from the SALT subtraction on both federal and state returns.
Under the current proposal, Republicans would eliminate taxes on tips and overtime, expand income deductions, and increase child tax credits, all designed to reduce the tax burden on working families. The plan also increases the standard deduction and expands a $6,000 deduction for seniors, which Farley said are among the largest drivers of tax savings for Arizonans.
Farley pointed out that when Arizona first implemented changes stemming from the 2017 federal tax overhaul, the state ended up with increased revenue that opened the door for state tax reform and rate reductions. Those reforms eventually contributed to the passage of a 2.5 percent flat tax rate in 2021. Drawing on his experience as a policy adviser and chief economist in the Doug Ducey administration, Farley said fiscal estimates on tax changes are typically conservative — meaning projected savings often turn out to be greater than initially calculated.
Farley emphasized that if the Legislature’s tax plan is enacted, Arizona policymakers will need to address how to balance the budget under the new system. He suggested that higher revenue growth or tighter control of spending could help offset the reduction in tax receipts. The state’s alignment with federal definitions of taxable income, he said, makes it easier to administer and more beneficial for taxpayers.
With the proposed changes under consideration, Republican lawmakers are pitching the plan as a way to simplify the income tax code, boost take‑home pay for residents, and spur economic growth. Supporters argue that reducing the tax burden will help Arizona remain competitive with other states and encourage investment and job creation.
As debate continues in the Legislature, business groups, taxpayer advocates, and residents will be watching to see whether the final version of the tax plan delivers the enhanced savings that early analysis suggests.
