Hobbs Vetoes $1.1B Tax Cut Despite Affordability Pledges

Summary: Arizona Gov. Katie Hobbs vetoed SB 1106, a $1.1 billion Republican tax conformity bill, days after promising affordability and middle-class tax cuts in her State of the State speech. The fast-tracked bill passed on party lines with Democrats voting no; Hobbs advanced a narrower $700 million plan critics call a relative tax increase. Public concerns mount that the lack of conformity—and no special session—risks forcing taxpayers to amend or delay filings.

ARIZONA – Arizona Governor Katie Hobbs vetoed Senate Bill 1106 (SB1106), a Republican-led $1.1 billion tax conformity measure that would have aligned Arizona’s state tax code with recent federal changes under the “One Big Beautiful Bill” (H.R. 1), delivering broad relief estimated at $1.1 billion over three years. The veto occurred on January 16, just days after Hobbs repeatedly highlighted affordability as her central 2026 priority, including explicit promises of tax cuts for middle-class families.

Fast-Tracked Through a Joint Committee

To meet the state’s tax-processing timeline, Republicans advanced SB1106 quickly by holding a joint hearing of the House Ways and Means Committee and Senate Finance Committee on January 14 where they heard public comment. This combined process allowed the bill—and its companion HB2153 in the House—to move swiftly through both chambers. It passed along party lines on January 15, with Democrats voting no in both the House and Senate.

• In the Committee, Sen. David Livingston said the bill gives Hobbs and the Democrats 70% of their tax cut asks, while balancing needs of Arizona business owners.

• Several Senators said in committee that if the bill didn't pass it would create uncertainty for taxpayers on whether they may have to file amended taxes depending on changes in the conformity bill.

• Sen. Justin Olson said SB1106 delivers a package of tax cuts for families and seniors, while Governor Hobbs said it helped billionaires.

Hobbs' Recent Affordability Pledges on X

In the weeks leading up to the veto, Governor Hobbs posted several times about her focus on lowering costs for Arizonans:

• January 9: "In 2026, I’m focused on making life more affordable through cutting taxes for middle-class families and lowering energy costs for Arizona households."

  
  

• January 15: "We all agree that hardworking Arizona families deserve a tax cut now, and I’m ready to deliver."

  
  

Details of the Vetoed Bill (SB 1106)

The legislation sought full conformity to federal tax provisions, providing immediate and wide-ranging benefits to seniors, families, workers, and businesses through expanded deductions, credits, and other federal-aligned adjustments.

Sen. Mesnard said Hobbs should have called a special session since taxpayers are relying on a conformity bill to be passed as soon as possible since the tax season has already begun.

Hobbs' Alternative Plan Draws Criticism

Rather than signing SB 1106, Governor Hobbs put forward a narrower tax package that eliminates state taxes on tips and overtime pay, raises the standard deduction for most filers, and adds deductions for seniors. While targeted, the plan delivers roughly $700 million in relief spread over several years—substantially less than the $1.1 billion immediate cut in the vetoed bill.

By declining full conformity, it excludes certain federal-linked benefits, leading critics to argue that many Arizonans face a relative tax increase compared to what full alignment would have provided. Senate President Warren Petersen said that Hobbs' plan is a $1 billion increase that "relies on unrealistic revenue assumptions and offers no credible plan for long-term stability."

Immediate Reactions on X

The veto prompted sharp responses from Republican leaders and groups:

• Arizona Senate President Warren Petersen (Jan 18): "Katie Hobbs just vetoed a 1.1B tax cut the republican led legislature put on her desk. But that is not all. She just released a budget plan that includes several tax increases."

  
  

• Arizona Free Enterprise Club snipped back at Hobbs (Jan 18): "Except when you had the chance to sign $1.1B in tax relief for seniors and working families last week, you VETOED it. Lip service means NOTHING unless it’s followed by action."

  
  

• Arizona Free Enterprise Club (Jan 17): "Vetoing $1.1B in tax relief for seniors and working families tells you everything you need to know about Katie Hobbs’ priorities."

  
  

• Rep. Andy Biggs (Jan 16): "Katie Hobbs vetoed a $1.1 BILLION tax cut for Arizona seniors, families, and workers. She is a weak and ineffective governor keeping Arizona from its full potential."

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The Bigger Picture

The episode illustrates how quickly major tax policy can move when fast-tracked through joint committee hearings and party-line votes—yet how final decisions still rest with the Governor and, ultimately, with the voters who elect every participant in the process. With budget and tax negotiations continuing, the Legislature may revisit conformity or consider Hobbs’ alternative in the coming weeks. Arizonans who want to influence the outcome can follow bill status on azleg.gov, attend or submit testimony at committee hearings, contact their representatives, or reach out directly to the Governor’s office. Arizonans can sign up to tell their legislators how they want them to vote on bills at ezaz.org/rts.

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