House panel votes for almost $60M in state tax cuts

The big winner in the plan approved by the Appropriations Committee would be corporations, whose income taxes would be cut by 2.5 percent. The plan also includes two proposals to reduce taxes businesses pay on buildings and equipment, and new tax credits for insurance companies that expand employment in Arizona.

But the plan, which now goes to the full House, also would give individuals a new $2,500 yearly state tax deduction — $5,000 for couples — for money they put aside into qualified college savings plans.

GOP leaders said the focus on business is justified because individuals are already in line for another 5 percent income tax cut, the second half of a two-year tax package approved last year. They will see those benefits, estimated at $178 million, when they file their 2007 tax returns next year.

The tax cut is part of a $10.6 billion budget plan for the coming year crafted by House Republican leaders. But it picked up some votes from across the aisle after GOP lawmakers added a few Democratic priorities, including some additional cash for teacher salaries and bigger pay hikes for state and university employees.

Despite that, it is likely to face a difficult time in the Senate, where Republicans have been in negotiations with Democrats for more than two months. That package is likely to have much smaller tax cuts and a bit more spending.

The House GOP program does not include many of the things sought by Gov. Janet Napolitano. Those include funding to ensure all public school teachers are paid at least $33,000 a year, expansion of a program that provides nearly free health care for children and a litany of special funding requests for universities.

But House Majority Leader Tom Boone, R-Peoria, said the plan actually provides money that could be used for some of these programs.

For example, there is an extra $80 million next year to fully implement all-day kindergarten. But school districts are free to use it for anything they want — including teacher pay — along with another $20 million in unrestricted funds.

Rep. Linda Lopez, D-Tucson, did manage to tack on another $8.7 million specifically for teacher salaries.

Rep. David Schapira, D-Tempe, complained that the plan shortchanges education. But Rep. Nancy McLain, R-Bullhead City, said the state could "spend zillions of dollars" and some people still would complain.

And while the proposal does not finance the governor's request for new programs at each of the three state universities, it does provide $30 million for the Board of Regents to earmark for priorities.

The amounts provided, however, are far less than the governor's recommendations.

For example, the plan to help retain faculty and students at the state's three universities would be nearly $30 million alone.

The budget proposal, however, contains enough money to give all state employees, including those at universities, a 3 percent raise.

Overall, the budget is just 2.3 percent more than the current funding plan. But that figure is a bit misleading because this year's budget includes a number of one-time expenses, such as $250 million to accelerate road construction. When only ongoing expenses are computed, the year-over-year increase is close to 9.1 percent.

That pretty much matches the anticipated 9 percent increase in state tax collections.

Arizona