On Monday, Feb. 1, 2021, in the committee of the whole, also known as COW, we debated HB 2113. This bill allows people to reduce their taxable income through charitable donations because it indexes the percent allowable to inflation. The current allowable amount is 25% of charitable donations (if you itemize your deductions, which almost no one does since the standard deduction was doubled.) At the current 25% rate, this tax cut, passed in 2019, took $24 million out of the general fund. This bill allows automatic annual inflation-based increases, with no sunset date, no cap, little accountability and “no guard rails”, as Rep. Mitzi Epstein pointed out in debate.
HB2113 is an income tax break for the richest Arizonans. You’ll remember that the Trump Tax Cuts and Jobs Act eliminated many income tax deductions including the charitable deduction and at the same time doubled the standard deduction. This simplification of the tax code is something people have been clamoring for for years. Doubling the standard deduction is the primary reason why most Americans no longer itemize their taxes. To fund business tax cuts in TCJA, many individual tax deductions were eliminated and folded into the standard deduction.
In TCJA, the charitable tax deduction moratorium lasts for only five years. Epstein and I tried to add a sunset date to the Arizona charitable tax credit deduction to align it with the TCJA, but that amendment was defeated. With the 2019 bill and this 2021 bill, Arizona Republicans are not only cementing the charitable tax deduction for the wealthy, they are making it ever increasing by indexing it to inflation and not allowing it to ever decrease, regardless of the economy. That is a Sweetheart Deal!
Epstein proposed three amendments to HB2113 today in COW. They would have increased accountability, transparency, and equity into this bill. The bill sponsor, Rep. Shawnna Bolick, who is the chair of the Ways and Means Committee, said that the Epstein amendments, “went against the intent of the bill.” Thanks for being clear about that!
In committee, vice chair representative Brenda Barton said, “This bill isn’t about charity. It’s about lowering personal income tax. People can give to whatever they want to.” Again, thanks for the clarity.
Also, in committee, Rep. Travis Grantham said that we need charity because “government has failed” the homeless and the people living on the street. I agreed with him, saying that is heartbreaking to see the dire straits of people living on the streets of Phoenix when I drive down 15th Ave. and turn onto Van Buren to go the capital every day. I reminded all of them that votes in the Legislature play a major role in these dire conditions. Arizona has one of the stingiest TANF programs in the country, the stingiest unemployment system in the country, and dreadful tenant landlord laws.
A hidden agenda with HB2113 is to lower the taxable personal income for wealthy Arizonans in order to avoid paying the education fee related to Prop 208. You’ll remember that Prop 208 charges a fee on personal taxable income over $250,000 for individuals and over $500,000 for couples. The Prop 208 fee will be paid by Arizona’s 1%, approximately 34,000 people. Arizona Republicans, including Governor Doug Ducey have vowed to neutralize the impact of Prop 208 on Arizona’s 1%. Remember all of those signatures you safety collected in the heat? Remember the amazing win in November? Republicans don’t care. HB 2113 is the first of multiple tax cuts this year. Providing tax cuts to the rich so they can avoid paying their fair share toward public education is tone deaf, at best. People are losing their homes, their health, their family members, and their lives to the COVID-19 pandemic. That is where our focus should be. We should be helping people keep a roof over their heads and food on the table. Not giving tax cuts.
UPDATE: HB 2113 passed the Arizona House on Feb. 2, 2021 (Groundhog Day) with all of the Republicans, 14 Democrats voting “yes” and 15 Democrats voting “no”. I point out that this happened on Groundhog Day because tax cuts for the rich pop up every year in the Arizona Legislature about this time. (To hear the COW debate click here. Slide to 59 minutes to hear my vote explanation. To see the vote on HB2113, go here to Feb. 2.)
This post originally appeared on Facebook on February 1, 2021.
Pam, Although they doubled the standard deduction with Trump’s so-called tax simplification, they eliminated the personal exemption, so the net effect is a little better, but not as great as expected…No one ever mentions that little sleight-of-hand trick they played on us lower-income non-home-owner folks who rely on the standard deduction.