Overview
- Republicans passed SB 1106 to largely mirror the federal tax overhaul, with analysts projecting a $441 million revenue hit in FY2026 and about $1.1 billion over three years.
- Gov. Katie Hobbs rejected the bill and is backing a narrower “Middle Class Tax Cuts” package estimated at roughly $250 million that omits several business breaks.
- The Department of Revenue has already released forms assuming full conformity, and officials warned retroactive changes could cost $20 million and require 200 staff, raising the risk of amended returns.
- GOP leaders urged taxpayers to delay filing and warned of confusion, while Democrats said the Republican plan favors wealthier filers and businesses and jeopardizes funding for schools and services; SB 1106 also added state‑only deductions for pensions, Roth IRA contributions, child care and dependents.
- How to cover the lost revenue remains unresolved, with Republicans discussing potential federal border reimbursements and education backfill shifts, and Hobbs proposing a budget that counts on federal border funds and higher fees on large sports‑betting operators.