HB 2788 Summary

• Establishes a flat income tax rate of 2.38% for all Arizona residents and nonresidents beginning January 1, 2013, replacing the existing progressive tax bracket system.

• Imposes an additional 1% tax rate increment on transaction privilege tax (sales tax) and use tax beginning June 1, 2013, with revenues directed to the urban revenue sharing fund.

• Requires the urban revenue sharing fund to receive revenues from the new 1% sales tax increment plus amounts necessary to maintain a minimum of $424.4 million annually, adjusted for inflation.

• Maintains existing transaction privilege tax rates for various business classifications while adding the new 1% rate increment for distribution to cities and towns.

• Corrects technical language and cross-references throughout Arizona tax statutes to implement the flat income tax structure and associated revenue sharing distributions.