At a time when Arizonans are still struggling to recover from years of Biden-era inflation, Republican lawmakers acted swiftly to deliver on their Affordable Arizona agenda. On just the fourth day of the legislative session, they passed SB1106, a tax conformity package that delivered the full benefits of the One Big Beautiful Bill (OBBB) to Arizona taxpayers, families, and businesses. The legislation provided $1.1 billion in tax relief and, just as importantly, immediate certainty for millions of Arizonans heading into tax season.
The very next day, Governor Katie Hobbs vetoed it.
That veto leaves taxpayers facing a potential $1.1 billion tax hike and widespread chaos as filing season begins. This isn’t simply the typical tax policy fight between Democrat and Republican ideologies. But a full display of Katie Hobbs’ failure to lead.
From the outset, she has mishandled this critical issue of federal tax conformity with conflicting messages, unauthorized executive actions, and zero coordination with the Legislature or even apparently her own agencies. The result has been a self-inflicted mess, and Arizona taxpayers will be the ones to suffer the price.
The chaos began in November, when Governor Hobbs issued a truly unprecedented executive order instructing the Department of Revenue to prepare tax forms conforming to her so-called “Middle Class Tax Cuts” plan. The problem? Governors don’t write tax law. Lawmakers do. The other problem? Her package included only half of the conformity relief from the OBBB, which would leave Arizonans with a $220 million tax hike.
As tax season loomed, Republican lawmakers urged Hobbs to call a special session to fix conformity before millions of Arizonans began filing. She wouldn’t. And now chaos is unfolding. Hobbs then compounded the problem in her State of the State address by demanding immediate action on “middle-class tax relief,” even though she had done none of the basic work to make it actually happen. Not one Democrat had introduced her plan via an actual bill.
At the same time, Hobbs publicly suggested that tax conformity could be negotiated later as part of budget talks, which typically occur well after the height of tax season. These contradictory signals left everyone guessing what Hobbs actually wanted. Does she believe conformity is urgent, or can it wait months? Was her executive order meant to dictate tax policy, or was she relying on future legislative action after all? Perhaps Hobbs herself doesn’t really know.
To make matters worse, her own Department of Revenue even further highlighted her dysfunction. DOR testified to a joint committee of the House and Senate, hearing the Republican-conformity plan (an actual introduced bill), that it issued tax forms assuming full federal conformity because no law existed directing them otherwise. They warned that if the state does not fully conform, more than one million taxpayers will be forced to refile amended returns, requiring the agency to hire roughly 200 additional employees just to process the backlog.
Hobbs’ public response to this implicating testimony was erratic. She began distancing herself from her own Department once it became clear that DOR had followed precedence rather than her directive. The irony was hard to miss. The same governor who assumed legislative authority she did not have, tried to abandon executive responsibility altogether.
Republicans, by contrast, responsibly moved with urgency to resolve this very real and pressing issue. Their tax conformity plan, introduced as SB1106, delivered the full benefit of the OBBB, making permanent key provisions of President Trump’s Tax Cuts and Jobs Act, increasing the standard deduction, eliminating taxes on tips and overtime, and providing $1.1 billion in tax relief. The bill was also tailored specifically to Arizona. Because Arizona already exempts Social Security from taxes, the senior deduction was adjusted to begin at age 60 rather than 65. It included retirement savings vehicles such as IRAs and 401(k)s as well as pensions and allowed deductions for Roth IRA contributions, incentivizing young workers to save for the future. A 25-year-old who invested just $100 a month into a Roth IRA could retire with at least $1 million by age 65.
This package delivered affordability and certainty. Hobbs vetoed it anyway.
This disaster was easily avoided. Governor Hobbs refused to call a special session before tax season, despite Republican lawmakers pleading with her to do so. She issued an executive order directing actions she had no authority to enforce. She had no bill introduced by her own caucus. She had no support for her package. She sent contradictory messages about urgency and delay. Her own Department of Revenue issued tax forms that reflect neither her plan nor the Legislature’s alternatives. And when Republicans finally delivered a comprehensive solution on the fourth day of session, (which would have conveniently gotten her out of the mess she made), she vetoed it.
Now Arizonans are filing taxes using forms that assume full conformity. Unless Chaos Katie changes her mind, many of those taxpayers will be forced to refile, incurring additional costs, delays, and frustration.
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