FILE - Doug Ducey

Arizona Gov. Doug Ducey and Arizona legislators applaud at a bill signing allowing a major expansion of sports betting in Arizona at an event at the Heard Museum on Thursday, April 15, 2021, in Phoenix.

(The Center Square) – In his final budget pitch to lawmakers, Arizona Gov. Doug Ducey is floating the idea to create a state-based tax refund for working parents similar to the federal earned income tax credit.

Ducey pitched his $14.25 billion budget to lawmakers Friday. Included in the 500-page spending plan is $74 million for a 5% state-based earned income tax credit targeting low-income households with children and jobs. 

Ducey’s aides said Friday morning that the plan would average $128 annually for qualifying taxpayers and benefit approximately 577,000 taxpayers in the state. Families with more dependents would receive more and the amount would taper off to a cap of approximately $50,000 of annual income. 

Lawmakers proposed a similar credit in the previous legislative session. 

According to the National Conference of State Legislatures, approximately two dozen states have some form of earned income tax credit but not all are refundable, meaning that you can't get more back than you pay in taxes. 

Ducey’s budget also includes $58 million for “industrial tax competitiveness.” According to the Tax Foundation, Arizona ranks 20th in overall business climate with the 10th overall industrial corporate tax rate.

Ducey office estimated Friday that the state, one of only a handful to fully recover job losses from the COVID-19 pandemic, will see $1.3 billion more in revenue next year than the current fiscal year that ends this summer. The increase in revenue represents an approximate 20% increase from the prior budget year. Aides added that the office expects $215 million in carry-over funds from the current fiscal year. 

Ducey’s $14 billion budget assumes funds from Prop. 208, a ballot initiative that adds a 3.5% tax surcharge to personal income over $250,000, will not be in the coming budget since the matter was largely struck down as unconstitutional by the Arizona Supreme Court last year. 

The plan also bolsters the state’s rainy day fund to just over $1 billion, Ducey’s office said. The spending plan sends $425 million to Arizona’s Budget Stabilization Fund. 

The list of recommendations are now in the hands of lawmakers, who will consider Ducey’s proposals in their budget crafting process in the coming months.

Regional Editor

Cole Lauterbach is a regional editor for The Center Square covering Arizona, California, and Nevada. For more than a decade, Cole has produced award-winning content on both radio and television.