Arizona’s economy is just starting to come back from a devastating spring and summer due to the pandemic shutdowns. The last thing we should do is pump the breaks on the recovery by putting in place the largest permanent tax increase in state history.
The proposed $1 billion-per-year tax increase is marketed as going to K-12 education, but how exactly will it be spent? Over the last few years, we have invested a lot in education in Arizona. In three years, enough money was designated to give teachers a 20% raise, and we currently allocate more than 50% of our state’s $11 billion general fund to support K-12 education. That percentage runs even higher if you add in funding for colleges and universities.
Like every campaign to increase taxes, the proponents of Proposition 208 brand it as only “a tax increase on the wealthy.” They are trying to conjure the image of making rich Uncle Pennybags from Monopoly, wearing a top hat and monocle and smoking a cigar with his feet on a desk, have to pay more in taxes. But the truth is that this tax increase will hit our greatest job creators the hardest, such as our small business owners and entrepreneurs.
It is an income tax increase that will nearly double the state income tax for individuals with income of over $250,000, including couples that take in over $500,000. While this sounds like a lot for most people, it does not take into consideration that many start-up companies and small business owners file their taxes as sole proprietorships—in other words, they file as individuals. If a small business is taking in less than $250,000 per year, they probably won’t be in business for long.
What’s worse, these are the very businesses that have been hit the hardest by the economic downturn caused by the pandemic. The last thing they need is an increased tax burden after months of diminished revenues. That could grind our state’s comeback to a screeching halt.
In the long term, this is a bad policy as well. We are trying to attract job creators to Arizona, not chase them away. High-tax states like New York have already seen this happen. In New York City, one percent of the population pays 50 percent of the taxes. When those people leave, the pain is very real. This led to the sad spectacle of New York Governor Andrew Cuomo begging wealthy residents to return, saying, “I’ll buy you a drink.” Ironically, thanks to the money they saved by moving, they are quite capable of buying their own drinks.
As Cuomo found out, these high income residents are “the most mobile people on the globe.” With remote work becoming easier, and even preferred, wealthy people can live anywhere.
Proposition 208 would make Arizona one of the 10 highest taxed states in America. If our tax structure signals to high-income individuals that they will be penalized for living in Arizona, they will simply choose to leave or not move here. Not only will we lose the alleged “Prop 208” revenue, we will also lose the taxes those individuals were already paying. Our economy will not benefit from the money they spend here, and the jobs they would have created will go elsewhere.
None of this will help our economy recover. A booming economy is the best way to make sure we can fund education. Proposition 208 would have the exact opposite effect than intended, which is why we must stop the largest tax increase in Arizona’s history and vote no on Proposition 208.
Dr. Kelli Ward is a family physician, two-term Arizona state senator, and the chairwoman of the Republican Party of Arizona. On Twitter: @KelliWardAZ