As voters head to the polls next Tuesday, commercial real estate and economic development professionals are calling on citizens to vote “no” on Proposition 208. The high-tax measure threatens Arizona’s economic growth and recovery, and could punish thousands of small construction businesses who would be subject to the new tax, they said. 

“I’ve been in Arizona for about a quarter of a century and this is the worst proposition to make the ballot during that time, and it may be one of the worst in the history of the state,” said Tim Lawless, president of Commercial Real-estate Executives for Economic Development (CREED).  

“It’s divisive. It’s very chilling to job creation and it’s basically killing the golden goose. We’ve got a good thing in Arizona and we need to keep the momentum and I feel this is going to sidetrack that totally,” said Lawless, whose organization represents the largest property owners in the state, accounting for a minimum of 70-million square feet under management and more than 5,000 business tenants, most of whom are small businesses. 

Why they oppose the ballot initiative 

Lawless is one of several real estate and economic development experts who spoke to �鶹��ýӳ�� about why they oppose Prop. 208. 

The ballot initiative is intended to tax top earners in the state to fund education. But it also will affect a large number of small businesses and sole proprietors in the construction industry who file their taxes under the individual tax code, not the corporate tax code, he said. 

In Arizona, the industry employs close to 150,000 workers, according to the Arizona Office of Economic Opportunity.

“People in commercial real estate, especially the developers, take a lot of risk when they decide to build a multi-million-dollar development, and they are typically small business people,” he said. “Many companies have 10 to 15 employees and everything else is pretty much subbed out and they create LLCs to push the work forward. 

“It’s really their skin in the game and this is going to have a chilling effect on them wanting to take greater risks.” 

Jobs, growth, tax revenues at risk  

The tax measure, also known as the “Invest in Ed” initiative, would almost double the marginal income tax rate for individuals who earn $250,000 or more, and couples earning $500,000 or more, from 4.5 to 8.0 percent.   

Local economists and groups like the nonprofit Arizona Tax Research Association and the Goldwater Institute have calculated that passage would create a dampening effect on jobs, new business growth and tax revenues. 

Commercial real estate group values education, not Prop. 208

Suzanne Kinney, president and CEO of the Arizona Chapter of NAIOP, the commercial real estate association, said her members care deeply about education and understand how important it is to pay teachers and support staff fair salaries in order to attract and retain the best talent. 

But placing the tax burden on the shoulders of small contractors, subcontractors, manufacturers and other small companies is unfair and creates a foreboding look into the future, Kinney said. 

“We believe a well-educated workforce is essential to the livelihood of Arizona. However, implementing a funding mechanism that singles out a small sliver of taxpayers will have a negative, long-lasting effect on small businesses,” she said. 

Competing with no-tax, low-tax states for major corporations 

If passed, the tax increase initiative would result in Arizona having the country’s ninth-highest income tax rate, said economic forecaster Elliott Pollack, CEO of Elliott D. Pollack & Company, who spoke during a town hall to chambers of commerce leaders Monday. 

Pollack said other high-tax states like California and New York are shedding people and jobs.

Arizona could easily lose its competitive edge to other states with lower income taxes, or no income taxes, like Texas, Kinney said. Brokers who work with national manufacturers are being told by some of their clients that they are putting planned investments on pause until the ballot initiative is decided.  

“If Proposition 208 passes, Arizona could get passed over for major corporate locations, including in the manufacturing sector,” she said. “Too many of our neighboring states have lower income tax rates, including several that have no income taxes at all.”

Stable funding source for education still needed

Kinney said she is concerned that the state has been unable to rally around a stable funding source that will provide schools with the resources they need without damaging the economy. 

“As a policy wonk, I am certain there are better ways to fund education. My dream would be to see all those who care about education come together around a better solution,” she said.

�鶹��ýӳ��s, real estate and economic development groups voting “no”

�鶹��ýӳ��s of commerce across Arizona, and real estate and economic development groups are opposing Prop. 208 including: 

Commercial Real-estate Executives for Economic Development 

Arizona Association of REALTORS

Arizona Builders Alliance

Homebuilders Association of Central Arizona

Arizona Multihousing Association

NAIOP Commercial Real Estate Development Association

Southern Arizona Home Builders Association

Southern Arizona Leadership Council

Associated General Contractors Arizona Chapter

Yavapai County Contractors Association

For more information and to view a complete list of who opposes the high tax measure, go to: . 

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With Election Day just two weeks away, the campaign over whether to increase Arizona’s top individual income tax rate by 77.7% has captured national political leaders’ attention.

President Donald Trump at a rally in Tucson on Tuesday Arizonans to reject Proposition 208.

“They have some deal in Arizona where your taxes are going to go way up. You know that, right?” the president said. 

The president also referenced Vermont Sen. Bernie Sanders’ support for the initiative.

Sanders, whose views occupy the far left of the American political spectrum, last week he was supporting the tax increase, which would also affect small businesses that are organized as pass-through entities and pay their taxes on the individual portion of the tax code. 

Arizona Gov. Doug Ducey has cited Sanders’ support as evidence that the initiative is extreme.

During a visit to a Phoenix charter school last week by Education Sec. Betsy DeVos, the governor called attention to Sanders’ support of the initiative, saying passage of the tax increase “would make us the equivalent of Bernie Sanders’ Vermont, or New York state or Washington, D.C.” according to of the event.

At yesterday’s Tucson campaign stop, Ducey thanked the president for calling attention to “what Bernie Sanders wants to do here by endorsing Prop. 208, wanting to raise our taxes 77%. So, on November 3rd, vote no on Prop. 208.”

Jaime Molera, the chairman of the , has referred to the initiative as “Bernie Sanders-esque” throughout the campaign.

Following the Sanders endorsement, Molera on Twitter, “Though my opponents dismissed my reference to a ‘Bernie Sanders-esque’ taxing scheme in my two debates (AZ Republic, who endorsed our position, and the AZ Cap Times) we find out it is real and backed by the extreme element of the progressive-wing.”

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We know Proposition 208 will cost Arizona jobs. The question is simply how many.

A  by the Goldwater Institute says under the most conservative scenario job losses will reach a minimum of 124,000 over the course of a decade.

An  by national economists Steve Moore and Dr. Art Laffer is even more pessimistic,finding that an estimated 200,000 jobs would be eliminated over 10 years.

The dean of Arizona’s delegation of economic soothsayers, Elliott Pollack,  the “new tax rate would put the state at a significant competitive disadvantage.”

Even the left-of-center Grand Canyon Institute  the job losses at 10,000.

Left, right, or center, the consensus is that Proposition 208 will lose jobs.

It could be your job.

Proposition 208 raises the state’s top individual income tax rate by nearly double. It doesn’t touch the corporate tax rate.

It’s an important distinction. Small businesses pay their taxes on the individual portion of the tax code. Proposition 208 raises the top rate by 77.7%, which means small businesses will pay a top rate of 8%—much higher than the corporate rate of 4.9%.

That’s not fair, and it’s not smart.

Small businesses’ contribution to the Arizona economy is significant and it’s a sector that will be essential to the state’s post-pandemic economic recovery. Fifty-eight percent of Arizonans employed in the private sector work for an employer who pays their taxes via the individual income tax. They get absolutely walloped by Proposition 208. Their ability to keep and grow jobs is put in doubt. It could be your job that’s at risk.

We’re in the middle of a pandemic that has done tremendous damage to the Arizona and national economies. Arizona has clawed back a little more than half of the more than 290,000 jobs it’s lost during the pandemic, but we’re still down nearly 140,000 overall. Do we really want to risk even more damage to the economy? Proposition 208 makes the economic recovery more difficult.

Proposition 208 is not a mainstream proposal. It was not crafted as part of a dialogue between lawmakers, the education community, and job creators. Proposition 208 is extreme. Bernie Sanders has endorsed it. That’s an endorsement that speaks volumes. No one will mistake Bernie Sanders as an advocate for job creators and small businesses. He certainly doesn’t know Arizona.

In fact, nothing about this proposition is Arizona-grown. This is a science experiment gone bad cooked up by out-of-state activist groups.

The proponents’ coalition is paper thin. A handful of the usual suspects who never met a tax increase they didn’t like.

Meanwhile, the opposition to Proposition 208 is broad and deep. , urban and rural, representing industries small and large, from real estate to agriculture to tourism and everything in between opposes Proposition 208. Small business, the sector of our economy targeted by the initiative, is solidly against the proposition’s passage. The Arizona Small Business Association, the National Federation of Independent Business, and local chambers of commerce across the state are some of the measure’s most vocal opponents. Even national powerhouse the U.S. �鶹��ýӳ�� of Commerce  Proposition 208.

Vote no on Proposition 208. Arizona can do better than to put its economy and thousands of jobs—maybe your job—at risk.

Glenn Hamer is president and CEO of the Arizona �鶹��ýӳ�� of Commerce and Industry. 

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Arizona, like the nation as a whole, is experiencing an uneven recovery from the initial economic impacts of the pandemic. What that means is that some sectors of the economy have rebounded sharply, while others remain in freefall.

At this critical moment, pro-growth policies can help businesses recover and help get the unemployed back to work, but bad policy risks further decimating businesses and jobs. Arizona’s Proposition 208 is perhaps the most misguided policy on the ballot—in any state—this November.  

Small businesses are a critical source of jobs and a vital part of our economic ecosystem, serving as both suppliers and customers to larger organizations. In Arizona, small businesses employ  of Arizonans in the private sector. In certain sectors, small businesses have an even larger footprint. For example, small firms employ 82 percent of all Arizonans in the construction industry and 62 percent in real estate. They also employ 56 percent of those in food services and accommodation and over 50 percent in professional and business services.  

Some of those , particularly those that rely on customers gathering in-person, have yet to rebound from the pandemic-induced recession. One in five jobs in the accommodation and food services sector that existed in February, for example, are gone today. Moreover, nearly 30,000 professional and business services jobs have disappeared. For Arizona to recover, these small businesses must recover. 

At the same time, we need the small business employers that are doing well to continue growing. Earlier this year, Arizona was  fifth in the U.S. for small business employment growth. It is easy to see why when you consider that sectors like construction increased their employment by nearly 40 percent over the last five years.  

But Arizona’s pro-business environment, and the ability of these small businesses to recover and continue to grow, would be fundamentally threatened if Proposition 208 is passed.   

Proposition 208 would increase tax rates on small business that pay taxes through the personal income tax by an astonishing 78 percent. Proponents  that this will generate nearly $1 billion a year in new taxes to fund schools. But that money has to come from somewhere, and it is most likely going to mean less business investment and fewer new jobs. One conservative  places the job loss at 124,000. And let’s not forget, fewer Arizonans working means fewer paying normal income and sales taxes,  the state and local governments an estimated nearly $2.5 billion over the next decade. 

Even these stark estimates may not tell the full story. Over the past decade, Arizona’s strong economy and quality of life has  more than 2 million Americans who moved so that they could call Arizona home. Many came from states that punished small business owners with high tax rates. If Proposition 208 passes, Arizona will move from being a low-tax state to having one of the top-ten-highest tax rates in the nation, alongside the likes of California and New York. Passing Proposition 208 would be the equivalent of rolling up the proverbial welcome mat and closing the door on small business owners.

Proponents of Proposition 208 claim that these tax increases are necessary to ensure a quality education for Arizona students. But that is not true either. Since 2015, Arizona has invested an additional  in K-12 education. Teachers’ salaries have increased by an .  

Since 2000, Arizona has made considerable progress in  the number of students who are at or above proficiency in math and reading. There is more work to be done, but it will take smart targeted investments that help improve our school system and our economy.  

Proposition 208 isn’t smart or targeted, it will hurt Arizona’s economy and cost the state jobs when we need new job creation the most. It deserves to be defeated.  

Suzanne P. Clark is the president of the U.S. �鶹��ýӳ�� of Commerce. Glenn Hamer is president and CEO of the Arizona �鶹��ýӳ�� of Commerce and Industry. 

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A new report that analyzes the economic impact of Proposition 208 in Arizona shows that the measure would hurt all income levels, resulting in lost tax revenues for critical services like child protective services, public safety, and higher education.  

If passed by Arizona voters on Nov. 3, the proposition, known as the “Invest in Ed” initiative, would put the state in the top 10 of the highest income tax states in the nation. 

That would, at a minimum, cause a $2.4 billion reduction in local and state tax revenues over the next decade due to lost business attraction and expansion, jobs and wages, the report states.  

“Small businesses across the country have closed their doors because of the COVID-19 pandemic, and now small business owners in �鶹��ýӳ��ay be dealt a further blow under Proposition 208,” said Victor Riches, president and CEO of the Goldwater Institute that conducted the analysis. “As this report shows, the backers of Proposition 208 want to turn Arizona into California or New York—where crushing tax burdens are driving job creators from the state and bankrupting their own futures.” 

The study, , was conducted by the Goldwater Institute’s director of education policy, Matt Beienburg, and Jim Rounds, a senior fellow.

Overall economic impact would offset benefits 

Under the initiative, Arizona’s top income tax rate would be raised from 4.5 to 8 percent – almost an 80 percent percent increase. 

Proponents of the measure want to tax high income earners to provide funding for K-12 education. 

But the analysis indicates that any benefits to education would be offset by the damage such a massive tax hike would have on the overall economy.   

“The promised increases in teacher pay and reductions in classroom size will be negligible. However, the economic harm from the measure will be significant,” said Rounds, adding that Arizona should be able to design “a better plan to help both the economy and K-12 education.”  

All industries and incomes will feel it 

To determine the potential impact of the ballot initiative, the economists analyzed the expected economic fallout, accounting for job losses, suppressed wage growth, dampened business recruitment, and harm to the state’s economic base. 

Should Proposition 208 become law, the report findings show that: 

• A minimum of $2.4 billion in state and local tax revenues will be lost As more businesses fail under the weight of the tax hike, job growth and wages would suffer. If the initiative succeeds, a conservative economic modeling of the financial impact indicates that a minimum of $2.4 billion in tax revenues would be lost over the next decade. 
• Cuts to social services, public safety, and higher education The mandate would cause a minimum of $120 million in lost revenues annually to the state’s general fund. Since the proposition requires any decrease in state revenue to be made up from other sources, that would likely put critical services on the chopping block.
• Arizona would see greater job losses than the 2001 downturn Under the most conservative scenario, job losses will reach a minimum of 124,000 over the course of 10 years. That’s four times greater than the losses experienced during the 2001 economic downturn.
• New business expansion would drop The risk to new business attraction and expansion could be as large as a 25 percent reduction.
• Proposition 208 won’t affect only high-income earners The measure will impact businesses that file under the individual, not the corporate tax code. Passage would jeopardize the employment of thousands of plumbers, dry cleaners, nurses, retail store employees, mechanics, janitors, and others throughout the state.

About half of the Arizonans affected will be small business owners Fifty percent of those whose tax rates will be directly targeted will be small business owners. These individuals represent thousands of job creators and they will bear a disproportionate load of the Invest in Ed price tag.

There are better ways to fund education

If voters pass the initiative, Arizona’s standing as a role model for economic growth could quickly erode, Round said.  

“Proposition 208 will impact the state’s ability to be a national leader in economic growth over the next decade. Arguments for additional education funding need to come from diligent research on individual budget items, not from broader generalizations about overall funding. Changes to public policy of this nature also need to be based on reliable return on investment calculations.” 

To read the full report, go to . 

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Let’s stipulate that no one is going to confuse California’s progressive Democratic governor, Gavin Newsom, with more conservative governors like Arizona’s Doug Ducey. But even Newsom understands the danger that a dramatic income tax increase can mean for a state’s competitiveness.

In announcing his support of a ballot proposition to create a “split roll” property tax system that will treat residential and commercial properties differently for tax purposes (itself a bad idea), Newsom also said he will an effort to raise the top state income tax rate and impose a wealth tax. 

What’s happening in California is instructive to the debate over Arizona’s Proposition 208, which would catapult Arizona’s top income tax rate into the top-10-highest in the nation by raising it 77.7%, from the current 4.5% to 8%.  

“In a global, mobile economy, now is not the time for the kind of state tax increases on income we saw proposed at the end of this legislative session and I will not sign such proposals into law,” Newsom .

Even Newsom gets it: In the freest country on the planet, individuals and businesses of all sizes can move to more welcoming tax environments when their current jurisdiction becomes overtaxed and overregulated.

At an August , Newsom was cool to higher tax proposals, saying California has to “consider the impacts of those decisions on your ability to retain and attract talent, individuals, companies, and your competitiveness. Everything needs to be considered in that light. And I would encourage those that are making proposals in this space to consider those impacts in relationship to what may or may not be happening in other parts of this nation.”

Granted, California already has the highest income tax rate in the country at 13.3% (on income over $1 million), but the principal that certain taxes are particularly damaging to economic expansion holds.  

When a big income tax increase during the middle of pandemic is too extreme even for Gavin Newsom, that should tell us all we need to know about the wisdom of Proposition 208. 

Glenn Hamer is president and CEO of the Arizona �鶹��ýӳ�� of Commerce and Industry. 

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Business groups across Arizona are opposing Proposition 208, saying the initiative, which seeks to tax certain earners to help fund education, would actually hurt small companies at a time when they are struggling during COVID-19 shutdowns. 

“This is really the wrong time to be even considering something like this,” said Chad Heinrich, Arizona state director for the National Federation of Independent Business (), who has dubbed the proposition the “small business destruction act.”

What many voters do not realize is that a large number of small businesses in Arizona file under the individual tax code, not as corporate filers, Heinrich said. If approved, those companies could end up slammed with nearly double the tax rate that big corporations pay.

One in five businesses may not survive pandemic

Small businesses already are struggling with thin margins and layoffs during COVID-19, said Jess Roman, CEO of the Arizona Small Business Association (). 

“There are so many things that small businesses are having to contend with. You’re working like hell to get through this (pandemic) and now you have this new potential cloud coming and you don’t know what the implications are,” he said. 

His members understand the value of education but they feel they are being singled out to shoulder most of the costs, he said. Everyone needs to work together to find a more sensible solution. 

About one in five, or 21 percent, of small business owners report they will have to close their doors if current economic conditions do not improve over the next six months, according to a recent NFIB .

Proposition 208 would be a nail in the coffin for many, Heinrich said.

“We’re not talking about big businesses here. We’re talking about mom and pop restaurants, small hotels, the local plumber. These businesses that are all being hit hard by COVID-19,” Heinrich said.

If passed by voters, Proposition 208 would raise Arizona’s top income tax rate from 4.5 percent to 8 percent — a 77.7 percent increase — for individuals who earn over $250,000 and households that earn over $500,000. 

Small business advocates, chambers worried 

Business advocacy groups and chambers of commerce across the Arizona are asking voters to votes “no” to the proposed mandate, including:

• Arizona Small Business Association
• Arizona Chapter of the Federation of Independent Business
• Arizona Lodging & Tourism Association 
• Arizona Manufacturers Council
• Southern Arizona Leadership Council
• Arizona Chapter of the NAIOP Commercial Real Estate Development Association 
• Arizona �鶹��ýӳ�� of Commerce & Industry
• Greater Phoenix �鶹��ýӳ��

Reasons why small businesses oppose Prop. 208 

Business groups cite a number of reasons why voters should say “no” to the ballot initiative: 

1. The tax would hurt small businesses 

Small businesses that are individually owned or have a small number of employees that file under the individual tax code could see their tax rate nearly double. That could cause a ripple effect, risking further damage to the state’s economy and jobs. 

Currently, 58 percent of Arizonans in the private sector work for a business that pays its income taxes via the individual income tax, according to a by the Arizona Tax Research Association (ATRA) and research from the nonpartisan.

2. Proposition 208 does not adjust for inflation

Unlike current state and federal tax rules, the proposition fails to adjust for inflation, which could sweep more small businesses into higher tax brackets. 

“Without an annual inflation adjustment, Proposition 208 goes from bad to worse,” Heinrich said. “This initiative should be known as ‘The Small Business Destruction Act.’ Ten years from now, $250,000 won’t have the same buying power as it does today, yet more taxpayers will find themselves falling into Proposition 208’s new 8 percent income tax rate.”

3. Voter initiatives are nearly impossible to amend   

If Proposition 208 passes, it will be nearly impossible to alter, even in the case of some unintended negative consequence.

Once passed by voters, it takes a three-fourths vote by the state Legislature to change a voter initiative. Then, any changes made to the act must further its purpose, Heinrich said. So even if lawmakers had the votes to amend the law, it likely would result in costly court challenges. 

4. Undermines Arizona’s pro-business environment

Under the weight of this proposed tax increase, Proposition 208 would punish the enterprising small business owners who create thousands of jobs and power the Arizona economy, Roman said. 

“Despite their claims to the contrary, Proposition 208’s authors demonstrate a shocking lack of understanding of how small business owners ensure sustained operations by reinvesting in their business and storing up working capital,” he said.

Would hurt education, economy in the long run 

Backers of the measure contend that the initiative would restore education funding. What they fail to disclose is that this would amount to “the largest tax increase in Arizona history,” said Glenn Hamer, president and CEO of the Arizona �鶹��ýӳ�� of Commerce & Industry.  

If passed, Arizona would be in the top 10 highest income tax states in the country, right up there with New York and California, Hamer said. 

“Left out of the script is that Proposition 208’s tax increase on small business would deliver such a shock to state revenues that future education funding would be put at tremendous risk. Also left out is that early childhood, community colleges, and universities are left with peanuts.”

To read testimonials from others who oppose the initiative, including Governor Doug Ducey, go to: .

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A ballot initiative to raise income taxes on certain taxpayers and small businesses is “poorly conceived” and “will not create a sustainable source of funding that is worth the economic malady it will cause” according to a new analysis by a tax watchdog group.

The report by the Arizona Tax Research Association examines Arizona’s journey from a comparatively high-tax state in the 1990s to one that is more competitive today regionally and nationally and the effect the initiative’s passage could have on the state’s prospects for future economic growth.

The report finds that despite Arizona reducing individual income tax rates by 36% since the 1990s, the individual income tax produces far more revenue today than it did in 1991 when adjusted for inflation.

“Adjusted for inflation, Arizona’s individual income tax rate is bringing in 185% more revenue today than it was back in the 90s when the highest rate was 7%,” ATRA Senior Research Analyst Sean McCarthy and the paper’s author said. “The proponents of the tax increase want to establish a new 8% tax bracket, which is 77% higher than the current top rate. We know from history, however, that doing so risks undermining the ability to attract new taxpayers and investment to Arizona.”

The paper cites data indicating that high-wage earners have sought out Arizona as a destination as the state’s tax code has become more attractive.

Between 1991 and today, tax filers with an annual adjusted gross income greater than $500,000 grew nearly 400%. Those filers are now responsible for more than $1 billion in state revenues.

McCarthy rejects the notion that high earners would still choose Arizona if income tax rates were to spike.

“We hear often that New York and California have lots of millionaires despite having high tax rates and that Arizona can do the same,” McCarthy says. “That ignores certain inherent factors those states have that Arizona simply doesn’t. People can move around. Arizona has been a net importer of new residents and tax filers from high-tax states, but that can all change if we join the top-10 list of states with the highest income tax rates.”

Small businesses that are organized as pass-through entities, like partnerships or S Corps, pay their taxes on the individual tax code and will be affected by the proposed tax increase. Citing IRS data, the ATRA report says more than a quarter of Arizona business filers and a large percentage of Arizona’s revenue will be impacted by the increase.

“Businesses make decisions on a number of factors, but a state’s tax environment is near the top of the list,” McCarthy said. “If increased hiring, expansions, and new investments don’t pencil out on a spreadsheet because of a higher tax burden, then Arizona’s economic growth is likely to be severely slowed.”

The paper takes issue with the claim by proponents that Arizona’s K-12 education system will benefit from the tax increase.

“The entire premise of this proposal is incredibly cynical. The proponents aren’t shooting straight with teachers,” McCarthy said. “Not only is the revenue that will come from this tax highly volatile and highly unlikely to deliver what the proponents are promising, but the dollars won’t even go to base K-12 funding.”

McCarthy says advocates for increased education funding would be better served to support policies that will encourage more robust economic growth and, as a result, generate more available resources for the Legislature and governor to appropriate to schools and teacher salaries.

“Lawmakers and the governor have demonstrated that they’re ready and willing to devote more dollars to the education system when the resources are available,” McCarthy said. “This initiative won’t even deliver for teachers the dollars that the 20×2020 teacher pay raise plan and the restoration of additional assistance funds have, but it will certainly create a drag on economic growth.”

.

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Arizona’s top tax bracket will increase 77.7% according to a summary adopted last Thursday by a legislative panel assessing the effects of the so-called “Invest in Ed” ballot initiative.

The summary approved by Legislative Council, which is comprised of state representatives and senators from each party, explains that the initiative seeks to assess a 3.5 percentage point increase on the current 4.5% tax rate on individual income exceeding $250,000 annually and married couple income exceeding $500,000 annually, resulting in an 8% tax rate on that income, a 77.7% increase over the current rate.

The summary also says that the tax increase will apply to income from small businesses that are organized as pass-through entities, like sole proprietorships and limited liability companies. Such small businesses pay their income taxes on the individual portion of the tax code, not the corporate tax code.

The Legislative Council summary will appear in a pamphlet that is prepared by the Office of the Secretary of State and mailed to voters before the fall election.

“The Legislative Council summary does a good job of explaining for voters just how dramatic a tax increase is being proposed by the tax advocates,” said Jaime Molera, the former state superintendent of public instruction who is chairing the opposition campaign committee Arizonans for Great Schools and a Strong Economy. “If this initiative makes the ballot and passes, Arizona’s top tax rate would be one of the top-10 highest in the nation. That would suppress our ability to grow our economy and would make it more difficult to continue to invest in our schools and teacher salaries. A healthy economy is what made possible the tremendous investments in our schools over the past several years, including the average statewide teacher pay increase of 20% that kicks in this school year.”

Chad Heinrich, the Arizona state director for the National Federation of Independent Business, said his organization was pleased that the Council summary makes clear that small businesses will be impacted by the tax increase.

“Voters deserve to know that Arizona small businesses are facing a huge tax increase if this measure were to pass,” Heinrich said. “The proponents do not discuss their plan’s impact on small business, but thankfully the Legislative Council summary shines a light on the 77.7% jump in the top income tax rate. A tax increase of this size is a bad idea even in a good economy, but in the middle of a pandemic when many small businesses have already closed or are hanging on by a thread, it’s incredibly irresponsible and destructive.”

In addition to the tax increase measure, the Legislative Council considered and adopted summaries of initiatives regarding the legalization of the recreational use of marijuana, criminal justice, and new regulatory mandates on the health care sector.

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