Senate panel OKs rise in standard deduction

By HOWARD FISCHER
CAPITOL MEDIA SERVICES
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   A legislative panel voted Thursday to stop subjecting many Arizonans to the ravages of inflation — at least as far as their tax bills are concerned.
   Without dissent, the Senate Finance Committee said the standard deduction allowed to taxpayers on their state income tax forms should be raised to compensate for the increase in the cost of living.
   The difference this year won’t be much: The standard deduction for a single individual or married person filing separately will go from $4,050 to $4,134. That would be double for joint returns.
   For someone in the 4 percent tax bracket, that translates into something in the order of a $4 tax break.
   But those dollars add up: The Department of Revenue reports the change would cost the state about $2.4 million this coming budget year.
   S en. Dean Martin, R-Phoenix, said it’s a simple matter of fairness. He said the failure to index for inflation essentially means the standard deduction is worth less each year in real dollars.
   Those who itemize, though, can claim more if their actual costs of deductible items has increased because of inflation.
   Martin noted that Arizona law did index the standard deduction from 1978 until 1990. Lawmakers, facing a potential budget deficit that year, scrapped the law; it has never been reinstated. He said the real way to be fair to Arizona taxpayers would be to go back to 1990 and make up the entire difference.
   But that would boost the deduction by more than 40 percent, to more than $6,700 and let each taxpayer reduce his or her payments to the state by more than $100 — and boost the loss to the state by 25-fold.
   "We can’t afford to do that right now," Martin said.
   SB1094 now goes to the full Senate.