On November 3, Arizona voters will decide on a measure that if enacted, will increase the top individual income tax rate in the state from 4.5% to 8% under the banner of “Invest in Education” to boost teacher salaries.
Proposition 208 also calls for additional funding to teacher mentoring and retention programs, career and technical education courses, and the Arizona Teachers Academy.
Proponents say the tax increase would only impact the top one percent of earners in the state.
“The Invest in Ed ballot initiative will provide the strategic investments Arizona needs in its public schools to attract new businesses and jobs to our state and boost long-term economic growth, and that is a pro-business strategy,” said David Lujan, director of the Arizona Center for Economic Progress.
“When passed, the top one percent of earners in Arizona – the ones who will be subject to this surcharge – will still pay a lower effective tax rate than 25 other states and lower state income taxes than the national average. Any income they earn below those accounts will be taxed under Arizona’s current income tax brackets, which we are not changing, and which are the fourth lowest in the nation.”
The tax would apply to single individuals making $200,000 or more and married couples bringing home $500,000 and up.
This is not the first time a measure has been brought to the voters involving education. Voters passed Proposition 123 in 2016, which increased the amount of money the state was taking out of the state land trust fund to boost education funding, including raising teacher salaries.
But U.S. Judge Neil Wake ruled in March 2018 that the measure violated federal law because the state did not get congressional approval before making the land trust payouts.
Supporters said at the time that Prop 123 would not raise taxes. Now four years later, a tax increase for the benefit of education is on the table.
If 208 passes, Arizona would have the ninth-highest income tax in the entire nation, joining California, Hawaii, Iowa, Minnesota, New Jersey, New York, Oregon, Vermont, and Wisconsin. According to the Bureau of Economic Research, of the aforementioned states, only three of them had personal income growth that exceeded the national average, while six fell short.
The same was true of employment growth, with 60 percent of the states with the highest income tax rates lagging.
The Goldwater Institute has described Prop 208 as “Good for Special Interests and Unions, Bad for Arizona.”
The conservative think tank claims that by the 10th year of implementation, job losses would reach a minimum of 124,000, with $2.4 billion in lost state and local tax revenues. As a result, small business owners will bear a “disproportionate load” of the measure, resulting in further economic damage.
GI also went as far to say that the General Fund would lose roughly $120 million per year, resulting in cuts to essential government services.
In 2018, the Arizona Supreme Court turned down the first version of the InvestInEd ballot initiative, stating that the ballot language “imposes tax increases on most Arizona taxpayers rather than only the state’s wealthiest taxpayers.” Less than two years later, the organizers behind InvestInEd are back with a similar proposal.
But Lujan believes Prop 208 will be a much-needed boost to public education.
“Arizona’s public schools will have $940 million in new, annual, permanent funding to educate our students,” he stated. “Prop. 208 will be good for our economy. It will bring more business to our state. 99 percent of Arizonans will not pay a single penny more (in taxes).”