Overview
- Gov. Katie Hobbs rejected SB 1106, a near-full conformity package Republicans passed that analysts estimate at $441.3 million in FY2026 and about $1.1 billion over three years.
- She promoted a roughly $250 million Middle Class Tax Cuts alternative with a higher standard deduction, tax relief on tips and overtime, a $6,000 senior deduction, and interest deductions on new U.S.-made car loans.
- Republican leaders defend their bill as broader relief and include added state-only breaks such as deductions for retirement distributions and Roth IRA contributions plus a larger child credit and a child care deduction.
- The Department of Revenue has already issued forms assuming full conformity, creating a risk of amended returns for early filers, and the agency says implementing the GOP plan could require $20 million and 200 additional staff.
- With no consensus on paying for the revenue losses, Republicans warn of “chaos” and urge taxpayers to delay filing as Hobbs unveils a $17.7 billion budget to launch negotiations.