Arizona Becomes Only State in the Nation to Deliver Historic Trump Tax Cuts As Part of Bipartisan FY 2027 Budget Agreement

ARIZONA, June 9 - FOR IMMEDIATE RELEASE
Tuesday, June 9, 2026

PHOENIX, ARIZONA—Senate and House Republicans have reached a budget agreement with Governor Katie Hobbs and are introducing budget bills today that make Arizona the only state in the nation to deliver President Trump's historic federal tax cuts at the state level while shrinking government, protecting school choice, fully funding public safety and transportation priorities, and imposing no new taxes or fees.

The $18.29 billion budget delivers approximately $1.45 billion in tax relief over four years, keeps spending growth to just 3.05%, below the combined rate of population and economic growth, and reduces net ongoing spending by $68 million. The budget also rejects or modifies more than $3 billion in proposed executive tax increases, fees, and spending expansions over the next three years.

"Arizona is leading the nation once again," said Senate President Warren Petersen. "For years, Arizona has built a reputation as one of the best places in America to live, work, raise a family, and start a business. This budget strengthens that foundation. Families are facing higher costs for groceries, childcare, housing, and everyday necessities, and we wanted to provide real relief. By adopting President Trump's tax cuts at the state level, expanding tax relief for families, and protecting educational freedom, we're helping Arizonans keep more of their hard-earned money while ensuring our state remains economically competitive."

The budget incorporates full federal tax conformity provisions, making Arizona the only state in the nation to adopt President Trump's tax cuts at the state level. This will ensure Arizona taxpayers will not have to refile their tax returns. The package includes no tax on tips, no tax on overtime, an increased standard deduction, a new childcare deduction, an enhanced child tax credit, expanded charitable giving deductions, and property tax relief for disabled veterans. The agreement also includes a three-year moratorium on the issuance of new certificates for the data center sales tax exemption while explicitly allowing construction of new data centers to continue. Together, these reforms provide meaningful relief for Arizona families struggling with rising costs while helping workers keep more of what they earn.

Despite delivering historic tax relief, the budget fully funds core government responsibilities and critical services. The package includes $112 million for corrections operations, including a 4% correctional officer stipend, $23 million for victims of crime assistance, $58 million for child safety operations- including foster care coaching and guardian contract costs, $25.5 million for county support programs, probation services, coordinated reentry efforts, and sheriff assistance, $10 million for wildfire suppression efforts, and $4.3 million to help rural hospitals draw down additional federal funding.

"When we began building this budget, our goal was to prioritize taxpayers while protecting essential services," said Senate Appropriations Chairman David Farnsworth. "We scrutinized spending, identified efficiencies throughout state government, and directed resources where they are needed most. We reduced ongoing spending, rejected unnecessary government growth, and built a balanced budget that strengthens public safety, protects vulnerable children, supports rural communities, and provides meaningful tax relief."

The agreement also reflects Arizona's strong fiscal position. While April revenue projections were lower than January estimates, actual collections significantly outperformed expectations, providing approximately $900 million in additional available revenue over the next three years.

"Budgets are ultimately about priorities and compromise," said Senate President Pro Tempore T.J. Shope. "Republicans came to the table focused on finding common ground without abandoning our principles. This agreement proves that bipartisan governing can still work when everyone is focused on results. We protected taxpayers, preserved key priorities, and delivered a responsible budget that moves Arizona forward."

The budget also includes reforms designed to improve accountability and integrity in government programs, including enhanced eligibility verification requirements for Medicaid and SNAP benefits.

"This budget puts real teeth behind our commitment to accountability," said Senate Majority Leader John Kavanagh. "By strengthening eligibility checks for Medicaid and SNAP, rooting out waste, and rejecting billions in new spending and tax hikes, we're ensuring taxpayer dollars go to the services Arizonans actually need, not to bloated bureaucracy or ineligible recipients."

Arizona's nation-leading Empowerment Scholarship Account program remains protected under the agreement, preserving educational freedom for Arizona families and ensuring parents maintain the ability to choose the educational setting that best meets their children's needs.

"Arizona families are feeling the pressure of rising costs, and this budget responds in a meaningful way," said Senate Majority Whip Frank Carroll. "Whether it's the enhanced child tax credit, the new childcare deduction, relief for disabled veterans, or protecting school choice opportunities for parents, this budget puts families first. We are making it easier for people to afford the things that matter most while continuing to invest in public safety and Arizona's future."

Budget bills will be considered during a Joint Senate & House Appropriations Committee hearing Wednesday morning in the House of Representatives and are expected to receive final legislative votes on Thursday.

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For more information, contact:

Kim Quintero

Director of Communications | Arizona State Senate Republican Caucus

kquintero@azleg.gov

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