As the State Legislature moves away from work on bills and toward the budget, it is considering a significant change to the state income tax system.
In 1972, in order to have a streamlined income tax process, cities and towns agreed that, in exchange for 15 percent of income tax revenue, they would not impose local income taxes. Currently, our legislature is discussing a move to a 2.5 percent flat tax that will reduce funds allocated to local budgets by $225 million per year. This approach would represent the largest revenue cuts to cities and towns ever by the state legislature. The cut represents about 27 percent of the shared income tax that is allocated to cities.
The proposed cuts also come at a time when cities and towns as a whole are dealing with $7.3 billion in unfunded liabilities in the public safety pension system, as well as a burgeoning backlog of street and road maintenance exceeding $5 billion, which directly affects Fountain Hills. Road and infrastructure projects local governments have engaged in have been major contributors to the positive economic development Arizona has seen over the past decade.
If the State feels that they have adequate funding for their budget, we ask that they hold cities and towns harmless, allowing their locally elected officials to continue to meet their important public safety, infrastructure and economic development obligations.
The League of AZ Cities and Towns expects this change to affect revenue into Fountain Hills by almost $1M per year (Municipal Impact of Income Tax Cuts, azleague.org). Please ask our Legislators to consider the Town of Fountain Hills when making this important decision.