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Arizona Voters to Vote on Proposed Wealth Surcharge

July 10, 2018

Arizona voters will decide in November whether to levy a wealth surcharge on high-income households.

Arizona voters will decide in November whether to levy a wealth surcharge on high-income households.

The initiative, the Investment in Education Act, would place a 4.54 percent tax surcharge on individuals with annual incomes between $250,000 and $1 million, in addition to the existing 4.46 percent income tax. Those earning more than $500,000 with household income exceeding $1 million would be hit with a 5.46 surcharge.

About 60 percent of the revenue from the new surcharge would be earmarked for salary increases for government teachers, in addition to the 19 percent pay hike already in the state’s biennial budget, the initiative states.

Foresees Revenue Reversal

Arizona state Rep. Vince Leach (R–Tuscon) says the state government’s revenues have been increasing quickly and the proposed tax hike would reverse that trend.

“Arizona has had an incredibly productive fiscal year,” Leach said. “We saw a 7.5 percent growth rate, as of June 21. We have seen increased revenues and increases across the board, although this would destroy that.”

‘Would Devastate Arizona’

Despite being labelled a “millionaire’s tax,” the surcharge will be levied against many people who are by no means among the idle rich, says Victor Riches, president of the Goldwater Institute.

“Although this is called a millionaire’s tax, the standard is set at $250,000 or more, which is not truly that wealthy, especially if one is filing with a small business,” Riches said. “This is all a bad deal, especially when considering how many truly wealthy people that are living in Arizona will leave if this passes, creating a diminishing return in terms of taxpayer dollars. This, paired with the disincentives to move here, will ultimately create a problem that won’t get better with time.”

Riches says the proposal would make Arizona one of the worst states for small business owners and workers.

“This Investment in Education Act would devastate Arizona, in terms of the economy, and would make it one of the worst states in the country in terms of income tax and overall tax burden,” Riches said. “Almost doubling the income tax for those who make more than $250,000 creates a situation where there is literally no incentive for anyone to ever relocate their lives, relocate a business, or start a small business in the state.

“It is, all around, a tremendous disincentive for any type of economic development in Arizona,” Riches says.

Says Measure Discourages Migration

Arizona’s economy is growing because of the state’s hospitable tax structure, but the proposed targeted tax hike would reverse that trend and encourage people to leave for other states, Leach says.

“We absorb somewhere between 162 to 200 people a day in the state of Arizona,” Leach said. “We can tell that these are young people coming here to work, due to our unemployment level dropping. These people are coming from states with harsher tax codes, like California, Illinois, New Jersey, and New York.

“If this initiative passes and we get these income tax increases, these people will go to states that have better tax codes,” Leach said. “We won’t get doctors, we won’t get tech companies, we won’t get startups, and we will lose our workforce.”

No Revenue Problems

Riches says raising taxes is not the solution to any education problems in the state.

“There are clearly cases that could be made that the allocation of funding could be reformed, although increasing spending and increasing taxes is not the answer,” Riches said. “Arizona spends $10 billion on K-12 annually. The Arizona legislature just passed a 20 percent teacher pay increase. There is actually no reason for this proposed this tax increase, because everything is already funded.”

Repeal ‘Virtually Impossible’

If the tax surcharge is approved, there may be no going back for Arizona residents, Leach says.

“What makes this even more troubling is that due to the voter initiative program that we have in Arizona, these ballot measures are ‘voter protected,’ which means that if this passes it goes directly into the state’s constitution,” Leach said. “If that happens, it cannot be changed unless a three-fourths supermajority in the House and Senate vote against it, which is virtually impossible.”

Riches says the tax hike would permanently cripple the state’s ability to attract new residents and job-creators.

“This huge increase in income taxes for those who make more, in a situation where income taxes couldn’t ever be lowered in the state, would be a disincentive for any type of economic development in the state,” Riches said.
Author
Samantha Fillmore writes from Chicago, Illinois.
samantha.heartland@gmail.com

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