Ducey proposes earned-income tax credit in $14B budget plan

PHOENIX (AP) — Gov. Doug Ducey on Friday proposed a tax credit for Arizona’s low-income workers, the first time in his eight years of pushing tax cuts that he pitched a benefit targeted at the bottom end of the income spectrum.

In his final budget proposal before leaving office, Ducey proposed a $14.3 billion spending plan that includes more corporate tax cuts as well as a new earned-income tax credit for people who work but earn low wages.

Ducey projects the state will start the fiscal year on July 1 with $2 billion in the bank because revenue has far outpaced expectations when the prior budget was approved last summer. He targets much of his new proposed spending on infrastructure, such as building repairs at prisons and water projects.

The Republican governor pledged upon taking office in 2015 to cut taxes every year he’s governor, and he’s kept his word so far. But his prior tax cut proposals have either been narrowly targeted to a specific group — like an end to taxation of veterans’ pensions — or have primarily benefited corporations and wealthy taxpayers.

His earned-income tax credit proposal would benefit 572,000 taxpayers with an average benefit of $128 per year, according to Ducey’s aides. It would be open to taxpayers earning less than $50,000 a year, who would get 5% of the federal earned-income tax credit for which they qualify.

Anti-poverty advocates have credited the federal earned-income tax credit as a big boon to low-wage workers, providing a lump sum of cash at tax-filing time. It’s generally enjoyed bipartisan support, with Democrats touting its benefits for the poor and Republicans promoting it as a reward for working.

Ducey set aside $58 million for a corporate tax cut but did not offer details. His aides said the exact plan would be worked out with lawmakers.

Ducey’s proposal, up 11% from the current budget, is his opening pitch to lawmakers. He’ll negotiate a final spending plan with Republican legislative leaders in the coming months.

Senate Minority Leader Rebecca Rios of Phoenix, the chamber’s top Democrat, praised Ducey’s earned-income tax credit proposal and his plan to increase payments to grandparents or other relatives raising children who would otherwise be in foster care. But she said the governor should not be giving corporations more tax cuts.

“This windfall will dry up, and we will at some point find ourselves, unfortunately, in a recession like we were in 2008,” Rios said.

The governor’s proposed education spending is welcome but falls far short of raising Arizona from near the bottom of states in per-pupil funding, she said.

Ducey also proposed giving raises to thousands of state workers, including troopers and correctional officers. He wants to cover the higher cost of transferring inmates to a private prison from a state-run facility in Florence, which he wants to close.

He proposed $50 million in new border spending, an unspecified portion of which to pay for a prison-style fence on private property at the border.

He also wants to spend $26 million to offer free tuition for graduates of an accelerated one-year training program for nurses at Creighton University’s new campus near Downtown Phoenix.

Ducey’s proposed new education spending includes nearly $120 million for two programs based on a school’s performance as measured by an A-F letter grade. In general, better-performing schools — which tend to serve wealthier families — would be eligible for larger grants. He’d also spend $20 million on transportation programs for parents who don’t send their child to their neighborhood school, a major boon for the school choice movement that Ducey has enthusiastically supported.

For higher education, he’d continue indefinitely $46 million in one-time funding approved last year for the state’s three universities. That money has boosted engineering at Arizona State University, health, mining, space and defense at University of Arizona and health care at Northern Arizona University.

Among his other proposals, Ducey would deposit $425 million in the rainy day fund and make the first of three deposits toward a $1 billion water infrastructure fund, a major proposal from his state of the state address on Monday. While he suggested in that address building a plant to turn sea water into drinking water, his actual proposal is much more generic.