(The Center Square) - Leaders of the Republican majority in the Arizona Legislature are telling residents to file their taxes now despite uncertainty over tax laws.
The Arizona Department of Revenue sent out tax forms to Arizonans despite the state government still determining how Arizona will change its tax laws to conform to the federal law changes made last July with congressional passage of H.R. 1 - the One Big Beautiful Bill Act.
With the tax filing deadline coming up on April 15, “people are nervous because there’s a lack of clarity from the governor’s office” on tax conformity, said Senate President Warren Petersen.
Tax forms have already been sent out, and over 1 million people have filed, Petersen, R-Gilbert, told The Center Square this week. He added he wants to give Arizonans the certainty and confidence to file their tax returns.
“There’s no scenario where we would allow the governor to punish taxpayers,” he said.
According to Petersen, Republicans are seeking to implement all the tax cuts from the One Big Beautiful Bill, while Democratic Gov. Katie Hobbs wants to implement around half the cuts.
Petersen, who has been in the state Legislature for 14 years, said he has never previously seen the Arizona Department of Revenue issued tax forms, only to be followed by the governor proposing contradictory forms.
Petersen said “all the momentum supports Republicans” because as more taxpayers keep filing their taxes, it will become harder for Hobbs to “unwind what she has put forward.”
Republicans are working on a budget currently that will be responsible, balanced and include full tax conformity to the One Big Beautiful Bill, the Senate president said.
Petersen added he is hopeful Hobbs will return to the budget negotiation table with the Arizona Republican leadership. Negotiations are at an impasse after Petersen and House Speaker Steve Montenegro, R-Surprise, said the governor walked away
“This year we can pass another budget in bipartisan fashion,” he said, adding that the Republicans’ door is open.
“She walked away and said, ‘Send me a budget.’ That’s what we’re going to do,” Petersen told The Center Square.
According to Montenegro, Arizona Republicans “are holding the line.”
“File your taxes. We will not support anything that forces Arizonans to refile or pay more because of the governor's poor decisions,” the speaker said. “Arizona families deserve certainty, and Gov. Hobbs failed to provide it.”
Petersen said within the next 30 days Republicans “are hoping” to send a budget to Hobbs’ desk.
Liliana Soto, Hobbs’ press secretary, told The Center Square by email that "we're glad they agree with the governor that Arizonans should file their taxes."
“Now, they need to pass the governor's middle-class tax cuts, show their budget to the public, and negotiate with the office in good faith," she said.
Senate Minority Leader Priya Sundareshan, D-Tucson, told The Center Square by email that “Senate Republicans are now telling Arizonans to file their taxes, after weeks of chaos and confusion they created.”
“Let’s be clear: Since day one, Senate Democrats have encouraged you to file. For most Arizonans taking the standard deduction, there’s no issue,” Sundareshan said. “The ‘urgency’ Republicans have pushed these last few months was manufactured due to their unwillingness to negotiate, and no filers will be impacted for this tax year.”
The Senate minority leader called the Republicans' budget “unbalanced,” noting “negotiations have stalled because they still haven’t brought forward a real plan, one that includes renewing Prop 123 and investing in Arizona’s future.”
“Don’t get distracted. Senate Democrats are fighting for an Arizona you can afford while Republicans are pushing bills that don’t help you succeed,” she said.
Chad Heinrich, state director of Arizona's chapter of the National Federation of Independent Business, told The Center Square it was “comforting that the [Republicans] have said taxpayers should file with confidence and that they are not going to allow changes to the tax base to impact the 2025 tax year.”
However, the state director pointed out that it's 2026 and that businesses “are making purchasing decisions right now.”
Arizona’s current tax uncertainty is not just an accounting problem, according to Heinrich, whose association's membership consists of businesses with five to 10 employees. He said it's also an “economic growth problem for Arizonans because businesses want to have certainty as to what the tax treatment [is] going to be for purchases [they] make in 2026.”
Every day the Legislature does not act on tax conformity is “another day Arizona businesses are making decisions in the dark,” Heinrich said, noting this is having “real economic consequences.”
Heinrich urged the Legislature and Hobbs to reach an agreement on federal tax conformity for tax year 2025 and future years.
“ That is the key to business owners being able to plan and make investment decisions in their business, because right now, many of them are sitting on the sidelines due to the uncertainty that's been created,” he noted.
If the state's budget ultimately includes only half of the tax conformity measures, then it will “be a nasty surprise for every taxpayer in the state,” according to Heinrich.
“Anything that they choose not to conform with would equal a tax increase,” Heinrich said.
