Soak the Rich Income Tax Ballot Initiative is Back

Soak the Rich Income Tax Ballot Initiative is Back

In an attempt to capitalize on the Red4ED strikes in 2018, education advocates and teacher unions organized efforts to put a $700 Million income tax increase on the ballot.

Dubbed the “InvestInEd” measure, the initiative purported to target this massive tax hike on the only the wealthiest of Arizonans. Ultimately proponent’s efforts were tanked when the Arizona Supreme Court ruled the ballot language was misleading and confusing.  

But they are back.  And this time they have redrafted their measure to try to head off the arguments used in 2018 to defeat the proposal. 

Instead of nearly doubling the tax rate at the top of Arizona’s income tax brackets, the new measure imposes a 3.5 percent surcharge on taxable income above $250,000 for a single person or $500,000 for married persons. The surcharge would create a new top rate of 9 percent, giving Arizona one of the highest income tax rates in the nation. And this won’t be a tax just on the wealthy—small businesses that file as LLC and S-Corps would be affected by this measure as well.

Proponents estimate $940 Million to be generated from the initiative, making it the largest income tax increase in State history. That of course assumes that the measure generates as much revenue as proponents anticipate.  The truth is, their figures are not derived from a dynamic model that takes into account market and behavior changes as a result of the new tax scheme. The reality is that investors, job creators and more affluent Arizona taxpayers won’t stick around long enough to pay this ridiculous surcharge.  They will find a way to not pay it.

Luckily for Arizona’s economy and future, InvestInEd proponents face much stiffer political headwinds than they had in 2018.  Far from the sea of red storming the capitol two years ago which then fueled the grassroots and volunteer efforts for InvestInEd 1.0, this year’s proposal was launched with tepid participation of around 100 people. And major political figures, such as Governor Doug Ducey, remain staunchly opposed.

It also doesn’t help that recent K-12 funding increases have undermined any serious discussion on the need of a tax increase. Far from the teacher pay narratives spun by the unions, Arizona actually ranks 16th in the country with the average teacher making over $55,000 a year.  The salary increases are due to the legislature and Governor Ducey pumping over $1Billion in new dollars into the K-12 system. 

Furthermore, the state does not need to raise additional taxes to continue to invest in education.  Arizona has an over $1Billion surplus (as they did in 2019) and have in fact already raised several taxes.  Given the tremendous gains our K-12 system is making in academic benchmarks, Arizona citizens should be more than skeptical of proposals to hike taxes at this point.

Without total synergy among the education crowd AND a generous injection of National Education Association dollars to support the 2020 InvestInEd proposal, prospects for it qualifying for the ballot, let alone passing, are anything but certain.