After tax hike at the ballot, Arizona businesses look to reform initiative process

(The Center Square) – The process of ballot initiatives in Arizona could be under the microscope in 2021 after a tax hike proposal largely funded by out-of-state interests passed, giving the state one of the highest top marginal income tax rates in the nation.

A new analysis from the Arizona Chamber of Commerce says the state’s ballot initiative process could benefit from new safeguards but appear to make passing a ballot measure increasingly difficult.

They suggest raising the number of required signatures for a proposition to make it to the ballot or requiring a certain number of signatures come from each legislative or congressional district and then increase the number of votes to enact the measure. They say the state should also consider a “single-subject rule” that would bar sweeping omnibus propositions that would allow for a less-popular measure to take effect when it wouldn’t survive on its own merits.

They said the state should reconsider an aspect of the Voter Protection Act of 1998 that keeps the legislature from repealing, amending or otherwise altering passed initiatives.

The chamber was one of Proposition 208’s most vehement opponents. Many of their member businesses file as pass-through entities and will be hit by the new tax.

Proposition 208, called the Invest in Education ballot initiative, adds a 3.5% tax on income of more than $250,000 for individuals or $500,000 for couples filing jointly. Opponents point out that the increase amounts to a 77% tax hike on the higher wages, which would also apply to businesses filing as pass-through entities.

The change would catapult Arizona into the top 10 states in terms of the highest marginal income tax. Combined with federal taxes, the top rate would be 57.34%, up from 43.85%.

The additional tax revenue, estimated to be $940 million annually, would pay teachers and other classroom personnel more, grants for career and technical services, programs to retain new teachers, and tuition grants for future educators.

The proposition was mainly funded by the California-based American Education Association and Stand for Children, a Portland, Oregon-based advocacy group.