By Howard Fischer
Capitol Media Services
PHOENIX -- Arizonans will get a chance to decide if they want to hike taxes on the state's most wealthy to help fund K-12 education.
In a brief order, the justices concluded that the 100-word description on petitions for the Invest in Education measure "did not create a significant danger of confusion or unfairness.'' The unanimous decision reverses the decision by Maricopa County Superior Court Judge Christopher Coury who concluded that backers of the measure "circulated an opaque Trojan horse of a 100-word description, concealing principal provisions of the initiative.''
The high court also found that various methods of providing bonuses and incentives to paid petition circulators did not run afoul of state laws which prohibit paying people on a per-signature basis.
Wednesday's ruling is most immediately a setback for the Arizona Chamber of Commerce and Industry which financed the successful legal bid to keep a nearly identical measure from going to voters two years ago. That means the business group and its allies now will be forced to make their arguments to voters that a tax hike -- even one that affects only the top 4 percent of wage earners -- is bad public policy.
But proponents contend that the current tax structure, including income, sales and property taxes, actually benefits the richest Arizonans, saying they pay proportionately less of their income to support government and public education than those at the bottom.
Arizona has a tiered income tax structure.
Individuals pay 2.59 percent on the first $53,000 of taxable income, 3.34 percent on everything between that and $106,000, 4.17 percent on income of $106,00 through $318,000, and 4.5 percent on everything over that.
Proposition 210 would add a 3.5 percent surcharge on all incomes above $250,000 for individuals and $500,000 for couples.
So, a single person with taxable income of $350,000 a year would pay 8 percent -- the 4.5 percent rate and the 3.5 percent surcharge -- only on $100,000; taxes for everything below that $250,000 cutoff would remain the same.
And anyone whose income did not reach the threshold would be unaffected.
Proponents say that could raise $940 million a year; legislative budget staffers put the anticipated take at $827 million for the first year.
Of whatever is collected, 50 percent is earmarked for hiring and raises for teachers and classroom support personnel, with 25 percent for other support personnel and 10 percent for program to attract and retain new teachers.
Another 12 percent is for career and workforce training programs, with the balance set aside for the Arizona Teachers Academy which provides free college tuition to those who agree to go into teaching.
Jaime Molera who chairs the chamber-financed opposition group, called Wednesday's ruling a "disappointment,'' saying he still believes that proponents "deceived voters with a flawed and misleading 100-word petition summary.'' But he said the ultimate appeal will be in the "court of public opinion.''
Molera is focusing on the fact that, for top wage earners, the tax rate would go from 4.5 percent to 8 percent, a 77.7 percent increase. And he argued that will create a "damaging'' increase to small businesses.
That is based on the argument that some businesses are set up not as regular corporations but in other forms, where the company pays no income tax and the earnings pass through to the owners who report it on their personal tax forms.
But David Lujan, who helped craft the initiative, said that is leaving out one crucial component.
He said owners do not pay taxes on the gross proceeds of their businesses but only on the net profits, after paying employees, rent and other operating costs. And Lujan, director of the Arizona Center for Economic Progress, said those earnings more than $250,000 a year as individuals or $500,000 as couples should contribute more to funding K-12 education, regardless of the source of their income.
Amber Gould, who chairs the Invest in Education campaign, called Wednesday's ruling "an important victory because it gives millions of Arizona voters the opportunity to put more resources into our schools.'' And she said that focusing the burden on the most wealthy ensures that it will not impact working and middle-class families who have been impacted by the COVID-19 pandemic.
One core issue of the campaign will be whether the state is providing enough money to properly finance the K-12 system.
Molera, for his part, said the state was able to implement a 20 percent pay hike over four years for public school teachers, all without having to increase the tax burden.
That still leaves the question of whether the state is keeping pace.
Legislative budget staffers say the state is now providing $5,762 per student, compared with $4,163 in 2001. But the same analysis shows that, after adjustments for inflation, state aid now is actually 4.5 percent less than what it was in 2001.
Gov. Doug Ducey already has staked out a position against the tax hike on he most wealthy.
"That's a whopping amount, especially considering that our economy is recovering from recession and high unemployment,'' he wrote in a statement against the measure.
The justices still need to decide the fate of whether three other measures will be on the ballot:
- Legalizing the recreational use of marijuana by adults;
- Giving judges more discretion in sentencing people for what are defined as "nondangerous'' offenses
- Mandating pay hikes for hospital workers, banning discrimination in health insurance for those with pre-existing conditions; and imposing new infection standards on hospitals.
Trial judges rejected challenges to the first two but ruled the third could not appear on the ballot. But all of those decisions are being appealed.
Separately, a judge found there were insufficient valid signatures on the petitions for the changes in sentencing laws. But that, too, is subject to appeal.
Decisions need to come soon. Election officials say they need to send General Election ballots to the printer by the end of the week.