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Arizona House Democrats would suspend two tax credits

PHOENIX – A budget plan by Democrats in the Arizona House would raise state income taxes for households making $250,000 or more, hire more people to collect delinquent income taxes and suspend two tax credits.

Democratic leaders said the plan would serve as a starting point for negotiations with the Republican majority to close the projected $3 billion budget deficit for the fiscal year starting July 1. As one of several pending budget proposals, the plan faces an uphill climb because it’s being championed by the minority party in one of two legislative chambers.

“This is a comprehensive plan that balances the state budget while protecting children and middle-class families from deep cuts to jobs and education. It will get our state’s economy back on track,” House Minority Leader David Lujan of Phoenix said in announcing the plan.

Republican leaders said the Democratic proposal made too few spending cuts and relied too heavily on tax increases that will worsen the economic climate in Arizona.

House Democratic Whip Chad Campbell of Phoenix said the plan would be cheaper to taxpayers than a $1 billion tax increase proposed by Gov. Jan Brewer. A sales tax increase of that magnitude would cost a family $360 a year, while the same family would pay up to $100 under the House Democratic plan, Campbell said.

One key highlight of the Democratic proposal is to raise the state income tax increase rate for only households making $250,000 or more annually. The proposed change would increase their taxation rate from 4.5 percent to 5 percent and generate about $80 million for the state, Campbell said.

The House Democrats also proposed beefing up the Arizona Department of Revenue’s staff so it can collect more delinquent taxes, a move Democratic leaders argue can bring in $150 million.

“It’s a mixture of taxes, fantasy and denials,” Republican Rep. John Kavanagh of Fountain Hills, chairman of the House appropriations committee, said of the Democratic proposal.

Kavanagh said there’s no way to document the amount of money that might come from seeking out delinquent taxes and, furthermore, it’s likely that many tax cheats are now suffering financially and wouldn’t be able to pay the money they owe.

The House Democrats also proposed suspending a tax credit used as an incentive for movie companies to film in Arizona and another tax credit for contributions made to the groups that provide students with grants for private school tuition. In all, the suspensions would produce $117 million for the state, Campbell said.

“We believe that if you are cutting $300 million from education and you are getting $100 million in tax credits, the math just doesn’t add up there,” Campbell said. “We need that money coming in.”

The Democrats want to create an automatic review of all state tax credits to determine if they are working or need to be shut down. Campbell said tax credits must be examined if Arizona wants to pull itself out of the hole.

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