Backed by at least one business group, Republican legislators launched a proposal Wednesday to cut individual and corporate income taxes by 10 percent — and state revenue by $440 million a year.
Rep. Laura Knaperek, R-Tempe, said the state is collecting more money than it needs. She cited estimates by legislative budget staff that revenue is outstripping anticipated expenses by $850 million.
Knaperek acknowledged that only $368 million of that is considered sustainable — meaning excess dollars that can be counted on year after year.
But Knaperek said she believes that figure could be larger if lawmakers exercise some discipline. She said the state is spending more money than it should, though she would not detail where.
Even without cutting spending, though, Knaperek said she believes the money would be there when the lower tax rates take effect in 2007.
"We all know that when we give back in income tax rate reductions, we create more dollars in the economy,’’ said Knaperek, who pronounced herself a "supply sider’’ in reference to a school of economics that maintains that reducing taxes generates more business, which, in turn, generates more tax revenue.
The plan got an immediate endorsement from the National Federation of Independent Business.
"Lower tax rates would allow our businesses to grow at a much faster rate,’’ said Michael Crow, state chairman of the organization’s leadership council. "It allows us to hire more people, to pay a higher wage, to invest more and to increase the pace, of course, at which our businesses can grow if we’re not hampered by higher taxes.’’
More than a dozen legislators, all Republicans, signed on as sponsors, including House Speaker Jim Weiers of Phoenix and Senate President Ken Bennett of Prescott.
Knaperek’s legislation is at odds with the tax-cut package proposed Monday by Gov. Janet Napolitano. She wants only $100 million in cuts — and only in specialized areas including school supplies, vehicle license fees and tax credits for small firms that provide health insurance.
The legislative tax-cut plan drew derision from Carol Kamin, director of the Children’s Action Alliance. She said if tax revenue is healthy, the state has needs that must be met before cuts are made.
"Let’s deal with the fact that our child care rates are based on 1998 market rates," she said.
"Let’s deal with the fact that we have the fourth worst number of kids without health insurance," Kamin said.
"Let’s deal with the fact that our (state) employee pay is 22 percent below the market rate."
Arizona income taxes
• $0 - $10,000 $5
• $10,000 -
• $20,000 $107
• $20,000 -
• $25,000 $262
• $25,000 -
• $30,000 $382
• $30,000 -
• $40,000 $571
• $40,000 -
• $50,000 $790
• $50,000 -
• $75,000 $1,181
• $75,000 -
• $100,000 $1,877
• $100,000 -
• $200,000 $3,411
• $200,000 -
• $500,000 $9,941
• $500,000 - $1 million $28,459
• $1 million or more $120,768
*Federal adjusted gross income Source: Joint Legislative Budget Committee