Radical Soak the Rich Initiative will Derail Arizona’s Economic Recovery

Looking to exploit the momentum created by the recent school strike, a small coalition of liberal organizations and labor unions have launched a ballot initiative that would permanently damage Arizona’s economy.

The proposed “Invest in Education” proposition would impose a new top individual income tax bracket of 9 percent, a near doubling of the current top rate of 4.54 percent.  This radical increase would give Arizona the 5^th highest income tax rate in the nation, trailing only California, Hawaii, Oregon and Minnesota.

Joining the ranks of the high-income tax states would be a decision that Arizona would quickly come to regret. The evidence is overwhelming—states with a low or no income tax have consistently outperformed high tax states in job creation and economic growth.

It is why for decades Americans have been voting with their feet and moving to states like Arizona with a favorable tax climate. On net, nearly 1,000 people a day are migrating to low income tax states, while the same number is exiting high tax states. If this initiative passes, we should expect entrepreneurs, high earners and employers to take their jobs and investments elsewhere.

To justify their crushing tax hike, proponents are promising that the approximately $700 million in anticipated new revenue from the tax will go toward K-12 funding. Of course, the initiative doesn’t include any language that ensures the money will make it into the classroom, nor does it include any reforms to improve outcomes or parental satisfaction.

They are also selling their plan on the idea that only the “rich” will pay the tax increase. In reality, small business owners and entrepreneurs will be hammered by the increase since they pay their taxes through the individual tax code.

Also unmentioned by the proponents of the initiative is that a new revenue stream for schools is no longer needed. While the Red for Ed debate was raging on at the legislature and in living rooms this spring, economic forecasts confirmed that Arizona would have the largest budget surplus since the great recession.

This tremendous news is not an accident. The rapid acceleration of projected revenue is a direct result of both local and national policies that fostered a pro-growth economic environment in Arizona. It can be argued that lawmakers reacted too slowly during the legislative session to allocate new funding into K-12 classrooms (close to $1 billion), but it illustrated that the best mechanism to generate more money for schools is through economic growth, not job crushing tax increases.

The impact of the largest tax increase in Arizona history would be catastrophic. It will kill jobs, punish small business owners and send families fleeing to other states. The proponents of this measure might think they are being clever by linking two politically attractive targets—school funding and taxing the “rich”—but we are confident that voters will see through their ploy and reject this divisive initiative if it reaches the ballot.