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Panel advances phased tax subtraction for some retirement distributions
Summary
The committee gave a due-pass recommendation to Senate Bill 13-71 as amended, a measure creating an income tax subtraction for certain retirement distributions phased in by age; sponsors and opponents debated budget impact and equity during the hearing.
The House Appropriations Committee on March 26 recommended a due pass for Senate Bill 13-71, as amended, which would create an Arizona individual income tax subtraction for distributions from qualified retirement plans and individual retirement accounts for older taxpayers, phased in by age.
Senator D.D. Mesnard, sponsor, described the proposal as narrowed from an earlier, broader plan to match the standard deduction and to encourage retirement savings. The committee adopted a Livingston amendment that phases in the minimum qualifying age starting at 71 and reduces it by one year annually until returning to 67, a change the sponsor said he supported as an incremental approach.
The hearing featured competing fiscal and equity arguments. Supporters said the subtraction rewards savings and can attract retirees to Arizona; opponents said it would disproportionately benefit higher-income households and shrink state revenue, risking cuts to services. Joseph Palomino of the Arizona Center for Economic Progress and other witnesses warned that long-term revenue loss could force reductions in programs that serve lower-income seniors and other vulnerable groups. Proponents, including the Arizona Free Enterprise Club, argued the policy is a reasonable incentive and noted similar policies in other states.
After extended debate and public testimony, the committee voted 11 yeses, 6 noes and 1 not voting; the committee reported SB 13-71 as amended with a due-pass recommendation.
