Arizona Judge Rejects Efforts to Nullify Wealth Tax-hike For Education Funding
By Howard Fischer
Capitol Media Services
PHOENIX -- A trial judge has tossed out most of the remaining claims of foes seeking to void the voter-approved income tax surcharge to fund public education.
But that doesn't mean the levy ultimately will be upheld, with one issue still set for trial. And the final word will be up to the Arizona Supreme Court.
In a ruling issued late Monday, Maricopa County Superior Court Judge John Hannah rejected claims that Arizona voters have no constitutional right to impose a tax on themselves.
Challengers, including Republican legislative leaders, claimed only the legislature has that right.
Hannah brushed that aside, said that is undermined by the plain language of the Arizona Constitution. He pointed out that the constitution specifically says any law that can be enacted by lawmakers "may be enacted by people under the initiative.''
"It could hardly be clearer that the people of Arizona reserved to themselves the authority to exercise (ITALICS) all (ROMAN) of the legislature's powers including the power of taxation,'' the judge wrote. "They have deployed that authority repeatedly through Arizona history.''
Hannah was no more sympathetic to the alternate claim that even if the people do have that power, taxes can be levied only by a two-thirds vote in the affirmative.
He acknowledged that voters did approve such a mandate in 1992 -- for legislatively approved tax hikes. But Hannah was not buying the argument that, in enacting that measure, voters were trimming their own power to approve higher taxes.
In his ruling, Hannah also rejected claims that Proposition 208 was unconstitutional because it spelled out that the money raised must be used to supplement existing state funding. It barred lawmakers from using those dollars -- an estimated $940 million a year -- from replacing funds they already were sending to schools.
Hannah was unimpressed.
"The claim rests on the premise that the Arizona Constitution somehow places the legislature on a higher or more powerful plane than the people acting by initiative,'' he wrote. "It doesn't.''
Hanging in the balance is the future of the initiative which imposes a 3.5% surcharge on taxable incomes of individuals earning more than $250,000 a year, or $500,000 for married couples.
It was approved by a margin of 51.7% despite objections from Republicans and business groups.
Half of the dollars raised are earmarked for grants to school districts and charter schools to hire teachers and classroom support personnel. Those dollars also can be used to raise teacher salaries.
Another 25% is for student support personnel, with 10% set aside to retain teachers in the classroom, 12% for career and technical education and the balance into a fund to help pay the college tuition of students who go into teaching.
Still pending is the legal question of whether the initiative -- and, specifically, the money it would raise -- runs afoul a constitutional cap on how much can be spent each year on education.
And some of the judge's earlier rulings are currently being reviewed by the Arizona Supreme Court. The justices have not said when they will rule on the existing challenge to the initiative.
The initiative has also become a flash point in the current efforts of state lawmakers to approve a new budget.
Plans by Gov. Doug Ducey and GOP legislative leaders seek to create a single 2.5% income tax rate for all wage earners. Current rates range from 2.59% to 4.5% for earnings over $318,000 a year for couples.
Lawmakers are constitutionally precluded from repealing the voter-approved 3.5% surcharge. So what Republicans are trying instead is an absolute 4.5% cap on all income taxes of any kind.
Under the plan, the state would still collect the 3.5% levy as mandated by voters. But the proposed cap means anyone in that category effectively would pay a tax rate of just 1% on all other earnings.