Arizona Education Advocates Fear GOP Tax Cut Sets Back Progress Made Through Proposition 208
Gov. Doug Ducey was no fan of Proposition 208, a 2020 ballot measure to raise taxes on the wealthy to better fund Arizona K-12 schools.
After voters approved the measure in November, Ducey and GOP legislative leaders devised a plan to reduce and flatten the state’s income tax rates. In doing so, education advocates say the Republican majority at the state Capitol are trying to eliminate the progress they made at the ballot.
“The flat tax is a horrible idea, and not only because of this year but it’s ongoing and it will basically negate what the Arizona voters said they wanted,” Kelley Fisher said.
Fisher, a Phoenix kindergarten teacher, joined concerned parents and educators — dressed in Red for Ed shirts — at the Capitol last week. They had limited access to the state House and Senate buildings, but protested outside against the proposed 2.5% flat tax.
The GOP proposal comes on the heels of Proposition 208, which levies a 3.5% surcharge on wealthy Arizonans that make more than $250,000 as individuals or $500,000 as couples. The surcharge would only apply to income over those amounts.
The revenues raised by the surcharge — which proponents say could be more than $900 million per year — would go toward hiring new teachers and raising compensation for educators; mentor and retention programs; and career and technical education.
David Lujan, the executive director of Children’s Action Alliance and one of the authors of Prop. 208, says the flat tax rate itself won’t affect new education revenue. But the GOP tax plan would create a way for wealthy Arizonans to avoid paying more in taxes.
“The state is basically going to be covering these wealthy people's tax obligations through general fund revenues, meaning we're gonna have less money in the general fund to pay for things like the money that goes to pay for our public schools, roads, transportation, all the other basic needs that the state provides for,” Lujan said.
Reducing revenues negates the hard work of educators who supported Prop. 208, Fisher said, and disregards the will of voters who decided wealthier Arizonans should pay a bigger share.
“To say ‘No, we don’t care what the voters said, we’re not going to listen to that, we know better,’ to have the Legislature say that is really leaving us out in the cold, and it’s very disrespectful in my opinion,” Fisher said.
The flat tax could also spell legal trouble for Republican lawmakers.
The Voter Protection Act prohibits the Legislature from altering voter-approved laws unless a super majority of lawmakers agree to it. Even then, Lujan says any changes must further the intent of the law.
“I think it goes against what the intent of Prop. 208 is, and I think there's a Voter Protection concern there for sure,” he said.
Daniel Scarpinato, Ducey’s chief of staff, says there’s nothing in the tax plan that alters what voters approved in November -- at least not the letter of the law that was on the ballot.
“There's no change to (Prop.) 208,” Scarpinato said. “The surcharge will be paid and the education community will receive the dollars that are tied to that.”
But Republicans aren’t just proposing a new 2.5% flat tax — they also want to cap an individual’s total income tax obligation at 4.5%. If the cap is 4.5% and the surcharge on higher income is 3.5%, the state could only levy another 1% in income taxes.
Attorney Paul Eckstein says the flat tax may violate the Voter Protection Act, at least indirectly.
“It's a clever ploy. I think it’s too clever by half,” Eckstein said. “And it clearly results in people with certain incomes paying a smaller amount of tax than they would pay as contemplated by Proposition 208.”
But that doesn’t mean Prop 208’s supporters have a slam dunk case, he said.
“The argument that the folks in the legislature are making, and will make, is that the surcharge still remains, and therefore, viewed narrowly, Proposition 208 is not impacted,” Eckstein said.
If a legal challenge is filed, a case against the flat tax plan is almost certainly bound for the Arizona Supreme Court. But Prop. 208 supporters like Lujan are already plotting a different way to challenge the GOP tax cut. In an email to a coalition of education groups, Lujan said a referendum would give voters the final say on the flat tax at the ballot in 2022.
Beth Lewis with Save Our Schools Arizona says Prop. 208 supporters are ready to gather signatures to block it, “and I don’t think it will go their way because polling shows that Arizonans do not like the flat tax.”
The advocacy group has a track record of success when it comes to blocking Republican laws. In 2017, when the group was in its infancy, they successfully referred a law to expand school vouchers to the ballot.
Opponents of the flat tax would have to collect more than 118,000 signatures within 90 days of the end of the legislative session.