Tax hikes proposed by the Biden administration place tens of thousands of Arizona jobs at risk, according to a new analysis conducted by the Seidman Research Institute at Arizona State University and Ernst & Young.

Looking for revenue to help pay for trillions of dollars in new spending, President Biden and congressional leaders have backed a $3.5 trillion package, which includes a slew of tax hikes – the bulk of which are aimed at employers and upper-income Americans. One provision in particular – a planned doubling of the Global Intangible Low-Tax Income (GILTI) rate – would hammer companies based in the U.S. but with operations overseas.

ASU Seidman and Ernst & Young found that 266 Arizona companies would be impacted by the GILTI increase. Specifically, according to the report, adoption of President Biden’s plan would:

• Eliminate up to 27,700 Arizona jobs in the first year following adoption, including as many as 42,500 total jobs if indirect losses are taken into account.
• Kill up to 46,800 Arizona jobs within the first five years.
• Reduce total economic growth in the state by as much as $5.1 billion in the first year and $6.4 billion over the course of a decade. 

“At a time when too many Arizona employers are just now recovering from the pandemic, this multi-trillion-dollar series of tax hikes is one more blow we don’t need,” Arizona �鶹��ýӳ�� of Commerce & Industry President and CEO Danny Seiden said. “The tens of thousands of job losses forecast by this troubling report mean further economic downturn and reduced opportunity for Arizona workers and families.”

GILTI was intended to target foreign income derived from intangible assets like software services, trademark royalties, intellectual property and more. Unfortunately, its impacts have proven far broader, placing a surtax on essentially any U.S. company that reaches customers abroad. The Biden administration has proposed doubling the GILTI rate to 21%, up from 10.5%. Arizona employers warn the increase, especially when coupled with a raft of other proposed tax hikes, will kill jobs and reduce their competitiveness in a global marketplace.

“Our economic recovery remains fragile, and these tax increases are just one more headwind for Arizona businesses to face,” said Steve Trussell, executive director of the Arizona Rock Products Association. “Many of our members have operations around the world, and these proposed tax hikes put them at a real competitive disadvantage. Ultimately, it’s Arizonans who pay the price if these damaging tax policies are adopted.”

Certain industries would be hit hardest by the GILTI increase. For example: the ASU Seidman/Ernst & Young analysis found that the agriculture, cConstruction, mining and oil & gas sectors could lose more than 4,800 jobs in the first year. The manufacturing industry risks the loss of more than 8,400 jobs.

In recent days, the National Association of Manufacturers (NAM) that found nearly 94% of U.S. manufacturers believe higher taxes would harm their business; 90% said the hikes could hurt their ability to add workers, expand facilities, or invest in new equipment.

Issuance of the report from ASU Seidman and Ernst & Young comes as House Democrats race to finalize details of their budget reconciliation bill, which is likely to include a host of tax hikes. The package is expected to come to a vote before the end of September.

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Glenn Hamer, the president of the Arizona �鶹��ýӳ�� of Commerce and Industry is a loud, vocal opponent of Proposition 208, the Invest in Education ballot initiative. 

He’s not alone. More than 55 major business organizations have joined him. From the Arizona Farm Bureau and Arizona Trucking Association to the Arizona Manufacturers Council and the state chapter of the National Federation for Independent Business.

Another 50-plus elected officials have come out publicly against the initiative. Governor Doug Ducey, Arizona State Senate President Karen Fann, Speaker of the House Rusty Bowers, Yuma Mayor Doug Nicholls, and Goodyear Mayor Georgia Lord, to name a few. 

“We’re a ‘hell, no’ for this job killing initiative,” said Hamer. “It threatens to destroy Arizona’s reputation as a pro-business, pro-job creation state.

“This proposition would shatter that by making us the ninth highest small business tax state in the United States of America.”

Hitting the virtual “pavement”  

Hamer, whose organization represents about 4,500 employers statewide, has been pounding the virtual “pavement” for several months to get out their message — and the facts — to the public about why this is so harmful.  

Prop. 208 targets top earners in the state and is intended to fund education. If passed, the marginal income tax rate would almost double for individuals who earn $250,000 or more, and couples earning $500,000 or more, from 4.5 to 8.0 percent.   

But Hamer said tens of thousands of small businesses would be affected as well. That’s why so many groups are opposing it. 

Q and A: Glenn Hamer, president and CEO, Arizona �鶹��ýӳ�� of Commerce   

What does an education funding initiative have to do with small business?

This would be the largest tax increase in Arizona history. Fifty percent of those impacted by this massive tax hike will be small businesses. This tax would put Arizona in the top-10 list of states with the highest small business tax — up there with California, New York and New Jersey.  

And by the way, these small businesses employ 58 percent of Arizonans that work in the private sector. They are small companies, sole proprietors, LLCs and others who file their income taxes as “pass through” entities under the individual tax code. They do not file under the corporate tax code.  

This proposition’s ultimate goal is to generate $1 billion for education. That means a quarter to a half-a-billion dollars will be carried by a lot of these small businesses and a lot of workers who are going to lose their jobs. 

And the last time I looked, we were still in a pandemic. We know that nationally, 1 out of 7 businesses are gone. Gone for good. And we know many more are teetering on the brink.

At this critical moment, pro-growth policies are what will help businesses recover and get the unemployed back to work. At the same time, we need the small business employers that are doing well to continue growing. We need them to keep employees on the payroll. We don’t want to do anything — anything — to make their job more difficult right now.

What about big corporations? Will they be subject to the tax?

No. It doesn’t affect the Fortune 500. So they collectively will not pay a penny of this. 

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 percent, which means small businesses will pay a top rate of 8 percent, much higher than the corporate rate of 4.9 percent. We would be the only state in the country to basically double the tax on small businesses, and at a time when so many are struggling. 

What are economists’ projections if Prop. 208 succeeds? 

Numerous economists and commentators have pointed out that high-tax states tend to underperform economically, sometimes dramatically so. An analysis of Proposition 208 by economists Dr. Art Laffer, Stephen Moore and Erwin Antoni compared the economic health of seven states with no income tax against the nine states with the highest income tax rates. Those seven states outperform the high tax states when it comes to population growth, employment growth, personal income growth and GDP.  

In our own neighborhood, we’d stick out like a sore thumb. Our neighbors Utah, Colorado and New Mexico all have top income tax rates under 5 percent but our current 4.5 percent rate is the lowest. Nevada doesn’t have a state income tax. If Proposition 208 passes we’d rocket up to a top rate of 8 percent.

You and other organizations have stated the high tax initiative would also affect jobs. How many jobs are at risk? 

As far as jobs, there has been debate about how many it would impact. The question is, will it be tens of thousands of jobs or hundreds of thousands of jobs? We’re already down 125,000 jobs from the pandemic. 

If 208 passes, the estimates range from 10,000 to 230,000 jobs will be lost over the next decade. Whatever the number, why take a risk in an economy that has been performing well and, because of that, allowed us to increase investments in our K-12 education system? 

Teacher salaries are a concern for many Arizonans. Won’t this provide higher salaries for teachers?

There is no guarantee of how much will actually go to teachers. There’s little to no accountability for spending in the initiative language. For instance, it mentions raises for “educators.” That encompasses workers in the cafeteria and bus drivers. These are honorable jobs but there is nothing to show that giving bus drivers a raise will improve student performance in the classroom. 

What is your response to criticism that the business community has failed to support education funding?

It’s a phony baloney sandwich. Business groups have long supported funding initiatives to increase education funding and improve academic outcomes. We strongly supported Governor Ducey’s 20 percent by 2020 plan for teacher raises. And the fact is we’re investing a billion extra dollars into our K-12 system and we’ve been able to do that because of our healthy economy. 

We support more dollars for teachers, but we’re not going to support something that’s going to cause great pain to the economy during a pandemic.

To read testimonials from other business and elected leaders who oppose the measure, go to: .

Here are major business groups in Arizona calling for a “no” vote:

National Federation for Independent Business 

Associated General Contractors Arizona Chapter

Arizona Cattle Feeders Association

Yavapai County Contractors Association

Arizona Automotive Wholesalers Association

Arizona Automobile Dealers Association

Arizona Bankers Association

Arizona Lodging and Tourism Association

Wine and Spirits Wholesalers Association of Arizona

Beer and Wine Distributors of Arizona

Commercial Real-estate Executives for Economic Development 

Free Enterprise Club

Goldwater Institute

Greater Phoenix Leadership 

Americans for Prosperity

Arizona Association of REALTORS

Arizona Builders Alliance

Arizona Cattle Growers Association

Arizona �鶹��ýӳ�� of Commerce

Arizona Farm Bureau

Arizona Farm and Ranch Group

Arizona Manufacturers Council

Arizona Rock Products Association

Arizona Tax Research Association

Arizona Trucking Association

Homebuilders Association of Central Arizona

Arizona Multihousing Association

InVision

Arizona Cotton Growers Association

NAIOP | Commercial Real Estate Development Association

Prosper

Southern Arizona Home Builders Association

Southern Arizona Leadership Council

United Dairymen of Arizona

To see a complete list of business groups, elected officials and others who oppose the initiative,  go to: .

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Of the $21,601,892.48 contributed towards the “Invest In Education” Political Action Committee, the group backing Proposition 208, only .7 percent of all contributions – just $151,411.44 – came from individual Arizona donors. 

The pro-Proposition 208’s third quarter and campaign finance reports reveal that nearly all of the group’s funding continues to come from wealthy donors, unions and special interest groups – all from out-of-state.

, , the editorial boards of the and , as well have urged Arizonans to reject the 77.7% income tax hike, citing the initiative’s anticipated loss of to , , and .

If Arizonans aren’t funding Proposition 208, who is?

National Education Association

The Washington, D.C.-based National Education Association – – contributed $6,000,000 in September and an additional $1,750,000 in October, for a total of $7,750,000.

The National Education Association’s , the Arizona Education Association, has donated a total of $1,147,291.09,

In total, 41 percent of all funding – nearly $9,000,000 – in favor of Proposition 208 has come from the teachers union and its affiliated groups. 

The union reports in revenue each year.

Stand For Children

Portland, Ore.-based Stand For Children, which had has contributed another $5,153,627.78.

In total, $9,235,202 – 42.75 percent – of pro-Proposition 208 contributions have come from Stand For Children. 

United Food and Commercial Workers

United Food and Commercial Workers, a union with across the country, donated $50,000 on Sept. 23. 

Most UFCW workers that will be taxed at the , while many small businesses will be taxed at a rate more than 60 percent higher, at . 

Open Society Foundation

The Open Society Foundation, based in Manhattan, on Oct. 14 in favor of Proposition 208 via its Open Society Policy Center. The Open Society Foundation reported $376 million of revenue in 2018, according to its .

Children’s Action Alliance

The Children’s Action Alliance donated $80,000 on Feb. 11 and an additional $5,000 on June 2. 

Movement Voter Project

The Movement Voter Project, based in Massachusetts, contributed $50,000 on Oct. 9. The group describes itself as seeking to build  

The group operates a fund, dubbed the “Big 5 Battleground Fund,” specifically supporting campaigns in Wisconsin, Michigan, Pennsylvania, Florida and Arizona.

League Of Conservation Voters Education Fund

The League of Conservation Voters, a Washington, D.C.-based group which recently endorsed and her , donated $75,000 on Oct. 14. 

Garcia for Governor

The campaign committee for David Garcia, the 2018 Democratic nominee for Arizona governor, of “surplus cash” to the group on Oct. 9. 

Garcia, , lost to Gov. Doug Ducey by a 14 percent margin.

Wealthy out-of-state donors

Two out-of-state billionaires from Oklahoma and California have contributed $2.5 million to the campaign.

Stacy Schusterman of Tulsa, Okla. donated $2,000,000 on Sept. 4. 

Schusterman is an oil and gas executive whose family in 2011.

Arthur Rock, of San Francisco, Calif., donated $500,000 on Sept. 23. 

Rock, who , is a successful Silicon-valley venture capitalist. He is president of The BASIC Fund, which according to , helps low income families “afford the cost of tuition at private schools in the Bay Area.”

Rock has also been a major contributor to KIPP, a large national charter school network, and Schusterman serves on the of the Charter School Growth Fund. 

The pro-Proposition 208 campaign coalition includes Save Our Schools, a group hostile to school choice. 

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Arizona voters are set to flock to the polls — or mail in their ballots — at this year. This surge in voter turnout comes amid a once-in-a-century pandemic that has taken the lives of more than 220,000 Americans and counting, and delivered tremendous economic turmoil.

It took years for the Great Depression to elevate domestic unemployment to near 20%. It took a month for the virus to bring unemployment from record lows hovering around 4% to just short of 20%.

Our economy is struggling, and not just in the abstract. Working- and middle-class folks are suffering as their wages are cut and the bills keep piling up. Students have been affected, too.

As a result of these socioeconomic conditions, students are cracking under the burden of mental, physical, and monetary pressures. USA Today, many students are simply choosing to drop out. This will have a sustained downward effect on future economic productivity and wage growth, something policymakers will have to contend with sooner rather than later.

At a time when Arizona’s economy needs an accelerant, some special interests are attempting to throw cold water on any chances of a recovery.

Here in the state of Arizona, teachers unions and out-of-state activist groups worked hard to get Proposition 208 on the ballot. Drafted in Portland, Oregon, Prop. 208 aims to dramatically increase income taxes and route the revenues to teachers and classrooms. Full of good intentions, 208 fails the test of good policy: results.

The initiative raises Arizona’s top income tax bracket by 77.7% — from 4.5% to 8% — to increase K-12 spending.Only 50% of revenues generated will even make it to classrooms and, even then, the exact allocation is specious since the definition of who’s eligible for funding is incredibly broad. Further, there is not a cent headed directly towards our state universities, save for 3% of revenues assigned to the Arizona Teachers Academy Fund. 

Worse yet, and critical to understanding the negative impacts of the proposition on Arizona students, the additional taxation applies to pass-through entities like LLCs, sole proprietorships, and more. This is primarily how small businesses, which employ 58% of Arizona private sector workers, are organized. Chances are, many of us will go to work for one of these job creators after we graduate.

It’s also not even clear if this tax would increase revenues at all. A published by the renowned Goldwater Institute concluded that Prop. 208 would cause Arizona to lose a “minimum of $2.4 billion in state and local tax revenues”.

In other words, Arizona voters are being asked to kneecap small businesses amid a public health crisis and economic disaster in order to deliver minimal results for students, families, and workers.

As college students, we’re all on board for increasing funding for education and ensuring that students, families, and teachers are fully accounted for. But this isn’t how we do it.

We are entering one of the worst job markets in decades. If Prop. 208 passes then small business will be crushed, wage growth will decline, and career opportunities will shrink. Don’t force us, the next generation of educated Arizonans, to move out of state after graduation. Now is the time to gas up and go, not slam on the brakes.

Sincerely, Arizona students

Joe Pitts is a sophomore at Arizona State University.

Jack Piekarz is a freshman at Northern Arizona University.

Alton Zhang is a sophomore at the University of Arizona.

Abhinav Kolli is a freshman at Duke University, registered to vote in his home state of Arizona.

Justin Groth-Roberts is a junior at Northern Arizona University.

Stephen Matter is a sophomore at Arizona State University.

Alyssa Kihoi is a senior at Arizona State University.

Matthew Martinez is a sophomore at Grand Canyon University.

Clay Robinson is a sophomore at Arizona State University.

Mackenzie Kirby is a senior at Northern Arizona University.

Allen El is a sophomore at the University of Arizona.

Cameron Decker is a sophomore at Arizona State University.

Taylor Hersch is a junior at Arizona State University.

John Touhey is a junior at Northern Arizona University.

Saular Rahimian is a freshman at Arizona State University.

Arjun Rondla is a sophomore at Arizona State University.

Jessica Carpenter is a senior at Arizona State University.

William Noll is a freshman at Arizona State University.

Cooper Ashton is a freshman at Arizona State University.

Ryne Bolick is a freshman at Arizona State University.

Frank Pauls is a freshman at Arizona State University.

Diego Píña is a junior at Arizona State University.

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The White House’s senior adviser on economic affairs outlined what Arizona businesses can expect if President Donald Trump is re-elected during an event sponsored by the Arizona �鶹��ýӳ�� of Commerce and Industry and the Arizona Bankers Association last week. 

The nation’s top economic adviser, Larry Kudlow, also urged the business community here to reject Arizona’s Proposition 208 tax increase. 

Pushing Arizona’s income tax rates higher during the pandemic would be foolish timing, said Kudlow, the assistant to the president for economic policy and the director of the National Economic Council. 

“While men and women are returning to work, this is not the time to raise taxes,” said Kudlow,  who leads the coordination of the president’s domestic and global economic policy agenda.

Unwise timing for a hike in income tax rates 

If passed, the so-called “Invest in Ed” proposition will raise the state’s top income tax rate by 77.7 percent, making Arizona’s top income tax rate higher than every other state in the West except California, and one of the ten-highest nationwide. 

“We are coming out of a pandemic contraction. We do not want to be removing money from the economy,” Kudlow warned. 

Higher income tax rates would erode Arizona’s economic edge at a critical time. Right now, Arizona is seen as a desirable location to live, play and do business. 

“Arizona’s personal and business taxes have been moderate down the years. It’s a hot sunbelt state and you don’t want to destroy that story,” he said.  

Data speaks to successes 

During the event, Kudlow detailed Trump’s platform for the economy moving forward, the administration’s successes so far, and efforts to help those still struggling from pandemic disruptions including small businesses, the airline industry and the unemployed. 

One only has to look at data from the U.S. Census Bureau, the U.S. Bureau of Labor Statistics and the Federal Reserve to count the success of the administration’s economic policies over the past four years, he said.

Prior to the pandemic, the standard of living went up for the first time in 20 years, corporate and individual income taxes dropped, and regulatory red tape was reduced, Kudlow said. 

“Inequity fell, poverty fell, unemployment fell, the living standard rose and family income rose,” he said.

Platform forward would be a repeat of past four years 

Basically, the economic plan for the next term would be a repeat of the White House’s guiding principles the past four years, he said. 

“That is, lowering business taxes across the board, lowering individual taxes, and rolling back costly and burdensome regulations,” Kudlow said.

Keeping the economy open and reopening schools while practicing all the lessons learned about masking, social distancing and hygiene is a top priority, he said. 

Also high on the list are investment in new technology advances in energy, particularly in natural gas fracking and horizontal drilling, and the brokering of “better” global trade deals to mimic the success of the new free trade agreement, the United States-Mexico-Canada Agreement (USMCA). 

Good news for full economic recovery 

A rash of economic indicators show that the pandemic recovery will be V-shaped, Kudlow said. A V-shape recovery is characterized by a quick and sustained recovery in measures of economic performance after a sharp economic decline.

Currently, about 80 percent of the economy has recovered and about 50 percent of the unemployed are back to work, he said. Industry sectors like construction, auto sales and manufacturing, and certain retail sectors are seeing “booming” growth. 

Meanwhile, unemployment is dropping. Since the country was shut down at the start of COVID-19, about 14 million workers are back to work, bringing unemployment down to 7.9 percent, he said.

CARES Act helped keep businesses, individuals afloat

Part of the recovery is due to the CARES Act economic stimulus package that was passed by Congress and signed by the president to help the country survive the shutdown.

About 12 million people are still unemployed, he said. Moving forward, Congress is trying to broker another package to help those still struggling. 

“We look at this (package) as being smart and targeted,” Kudlow said. “The other side sees this as a political and ideological wish list.”

Nevertheless, the Republicans and the president are willing to “compromise and put up more dollars to make a deal.”

Meanwhile, $139 billion from the act is still waiting to be allocated. Congressional members need to pass stand-alone bills to appropriate the funding to aid those still in need. 

President “rewards success”

In conclusion, Trump’s economic policies “have benefited those who need it most,” Kudlow said. A vote for Trump will be a vote for America’s recovery. 

“He’s a president who wants to reward success and promote workers. Whereas my friends on the other side seem to always want to punish success.”

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A that analyzes the economic impact of Proposition 208 in Arizona shows it will likely place Arizona 8th or 9th in the nation for the highest income tax rates. Negative unintended consequences will likely follow, two nationally renowned economists said Tuesday.  

The ballot initiative is intended to tax the state’s highest earners, but those at the bottom of the income scale would suffer most, said Stephen Moore, an American author and television commentator on economic issues, who released the report during a press conference hosted by the Arizona �鶹��ýӳ�� of Commerce and Industry. 

“It’s not the rich people that are going to be hurt. The rich can pay higher taxes or they can go somewhere else. It’s really the people at the bottom who will lose jobs,” Moore said. “About half the impact of this tax will be paid not by big corporations and not, you know, the very, very wealthy, but will be paid by the small business owners. 

Moore and fellow economist and researcher Dr. Arthur Laffer conducted an analysis of how tax rates have affected states over the past 30 years for the report, “Arizona’s Proposition 208 Loses Jobs and Harms Small Businesses.” 

What they found is that almost all states with lower income tax rates perform better than higher income tax rate states in most economic indicators. 

Initiative would almost double top tax rate

Proponents of the measure, also known as Invest in Ed, want to tax high income earners to provide funding for K-12 education. 

Under the initiative, Arizona’s top income tax rate would be raised from 4.5 to 8 percent – almost an 80 percent increase for individuals who earn $250,000 and joint filers who earn $500,000.  

Couldn’t come at a worse time for small business

The tax increase would come at a time that could further devastate a large number of small businesses that may be affected by the new tax, said Laffer, who is known as the “Father of Supply-side Economics” for inspiring a world-wide tax-cutting movement in the 1980s. 

Those most at risk are small businesses still struggling to keep their doors open during the pandemic. 

Simply put, Arizona would move from having the 13th lowest income tax rate on small businesses to the 8th or 9th highest in the nation, Laffer said. 

Raising taxes when the nation is trying to recover from the COVID-19 is “inappropriate and foolish,” Laffer said. 

Almost all states with lower tax rates perform better

Such a drastic increase would dampen investment and growth, and research backs that up, they said. 

In conducting their research, the economists examined how similar types of tax increases over the past 30 years have affected states. Almost all states with low or zero income tax rates performed better in most economic indicators than those states with high tax rates, they found. 

High tax states saw less revenue for government responsibilities, including education, Laffer said. 

An analysis of the 11 states that introduced income taxes since the 1960s shows they are at the “very bottom of performance” in not only economic and population growth, but revenue for public services, Laffer said. 

Harsh implications for Arizona

Using data from other states, the economists measured the impact Arizona’s Proposition 208 would likely have on jobs, wages, interstate migration, tax revenue collections, state competitiveness, and small businesses.

They found that all areas would likely suffer, making “Arizona residents poorer and the state’s economy less competitive.” 

Among their findings:

•An estimated 200,000 jobs and about $25.5 billion in personal income would be lost over the  next 10 years. 

• Fifty percent of the tax would be borne by small business owners and operators that typically generate from half to two-thirds of the jobs in a state.  

• Arizona’s economic competitive position among the 50 states would fall from No. 10 to No. 16, according to the ALEC-Laffer competitiveness index.

•The state would lose 700,000 people in net instate migration over just the next decade.

•Wage growth would decline in the state and after a decade average household income would be roughly $6,000 lower with the tax hike. 

•A loss of businesses, jobs and taxes from in-migration would reduce by half the proponents estimate of $1 billion in tax revenue gains 

“The preponderance of the evidence shows a negative effect when states raise income taxes,” Laffer said. “That’s because we’re a country where people can move across borders. We’re a very mobile population. Businesses, corporations and financial capital can move across borders and they do.

“They move to places where they have the best pro-growth and pro-business atmosphere.”

About Stephen Moore

Stephen Moore is FreedomWorks’ chairman of the Task Force on Economic Revival. He previously served as president of the Club for Growth, chief economist of the Heritage Foundation, and as a member of the Wall Street Journal editorial board.

About Arthur Laffer

Arthur Laffer is the founder and chairman of Laffer Associates, an institutional economic research and consulting firm, as well as Laffer Investments, an institutional investment management firm utilizing diverse investment strategies. Dr. Laffer’s economic acumen and influence in triggering a world-wide tax-cutting movement in the 1980s have earned him the distinction in many publications as “The Father of Supply- Side Economics.”

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A batter in baseball going 0 for 3 at the plate is the equivalent of a rough day at the office. When a political campaign goes 0 for 3, it’s the equivalent of getting sent down to the minors. 

Based on its three TV ads, the pro-Proposition 208 campaign should start packing its bags. 

If passed, Proposition 208 would take the state’s top individual income tax rate from 4.5% to 8%, a 77.7% increase. 

That’s not some obscure aspect of the initiative buried deep in the text; it’s the initiative’s central provision.  

You wouldn’t know that, though, by watching the proponents’ ads. After several weeks of ads with Hollywood-level production values, not once has the pro-208 campaign disclosed to Arizonans that the initiative is asking voters to approve the biggest permanent tax increase in the state’s history.  

The ads also have yet to mention who the tax increase impacts. It’s not just a handful of wealthy tax filers, but rather the small businesses that power the Arizona economy and that will prove indispensable in Arizona’s post-pandemic economic recovery. After all, small businesses pay their taxes on the individual portion of the tax code. If Proposition 208 passes, their top tax rate will be even higher than Fortune 500 companies.  

Research papers from the Goldwater Institute and the Arizona Tax Research Association have zeroed in on the extent to which Arizona small businesses get walloped by Proposition 208’s tax increase.  

“An analysis of IRS data—supplemented by additional modeling and adjustments to identify only those Arizona taxpayers directly affected by the rate increase— reveals an estimated 90,000 Arizona tax filers who will be affected. Of these, more than 50% would be small business owners,”  by Goldwater’s director of education policy, Matt Beinenburg, and senior fellow Jim Rounds.  

As ATRA’s Sean McCarthy , those small businesses are job creators. “Fifty-eight percent of Arizonans in the private sector work for a business that pays its income taxes via the IIT (individual income tax).” 

A higher tax burden for these small businesses means depriving them of working capital (as  by Republic columnist Bob Robb) that they can use to hire new employees and make the investments in things like machinery and equipment that have led to Arizona having one of the country’s strongest, most dynamic economies and where, pre-pandemic, one of our toughest challenges was finding qualified workers to fill available positions.  

The proponents attempt to argue that the initiative delivers when it comes to accountability, but here again they swing and miss. Proposition 208’s definitions are so expansive as to who’s eligible for funding that there’s no guarantee new dollars will reach teachers. Never mind that Proposition 208 depends on the most volatile segment of state tax revenues. No district would base its budgets or teacher pay contracts on the slice of the tax pie that experiences the wildest fluctuations. As ATRA’s McCarthy details, the first year of the great recession saw revenues in these brackets plunge more than 30% due to cratering business profits. If school districts are banking on these revenues, then they’re in for a wild—and disappointing—ride.   

Proposition 208’s ad makers have a difficult task on their hands. They’re attempting to sell a huge permanent tax increase on small businesses that falls far short of delivering for teachers, and they’re attempting to do so in the middle of a pandemic. If their first three spots are any indication, we can expect more glitzy productions between now and Election Day, but very little straight talk.  

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

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If a ballot measure that seeks to increase taxes on certain taxpayers and small businesses is adopted by voters in November, it would vault Arizona onto a top-10 list of states with the highest tax rates in the country.

But it’s a big if. A superior court judge has the initiative, known as Invest in Ed, not to appear on the fall ballot due to organizers’ failure to properly describe the principal provisions of the measure on the petition that voters signed to send the question to the ballot.

The initiative organizers have appealed the decision to the state Supreme Court.

A 77.7% jump

If the high court overturns the lower court decision, voters will be asked whether to increase the state’s top tax rate, currently 4.5%, to 8.0%, a 77.7% jump.

The 8.0% rate would slot Arizona between Wisconsin and New York according to done by Intuit TurboTax. Of Arizona’s neighbors, only California would have a higher top income tax rate.

A published by the Tax Foundation, a nonpartisan organization focused on analyzing economic policy and its impacts on real outcomes, shows that higher taxes on income have been historically linked to lower economic growth, decreased investment, and less job growth.

Arizona’s economic competitiveness and robust jobs market has grown stronger with time. The state has vaulted ahead in the past decade to the top of lists ranging from “” to “”.&�Բ�����;

The Invest in Ed initiative could put this momentum at risk, opposition groups argue.

Garrick Taylor, spokesman for the Arizona �鶹��ýӳ�� of Commerce and Industry, that, “This will put downward pressure on economic growth and make investing in schools and teacher salaries more difficult going forward.”

“Crushes Arizona’s reputation”

In a statement submitted for the election year publicity published by the Secretary of State’s Office, Arizona Tax Research Association President Kevin McCarthy says Arizona’s tax rates stack up well regionally and nationally.

“Our rates are low enough to be both regionally and nationally competitive, encouraging economic growth in Arizona as well as attracting new residents and businesses,” McCarthy said. “Upturning this effective system with an 80% increase to the top marginal rate permanently changes Arizona’s framework from ‘low cost, high growth’ to ‘high tax, steer clear.’ In one shot, it crushes Arizona’s reputation as friendly to small business. It signals to businesses everywhere that Arizona has an unreliable tax climate and is not suitable for investment.”

Economic growth vs. out-migration

National publications have taken notice of Arizona’s increased competitiveness nationally.

The American Legislative Exchange Council in the of its “Rich States, Poor States” report said tax reforms included as part of the state’s conformity to the federal Tax Cuts and Jobs Act “lightened the income tax burden for nearly every filer.” 

“�鶹��ýӳ��ade the right decision to make federal tax conformity a net tax cut for income earners,” the report says.

The ALEC report finds that states that adopt smart tax and regulatory policies are more likely to achieve economic growth, while comparatively high-tax states are more likely to experience out-migration of capital and residents. 

“Those with lower taxes, reasonable regulatory burdens and sensible budgeting demonstrate a record of opportunity growth that continues to attract new residents.” 

Education funding

Since the turn of the century, there has been bipartisan support for increasing education quality and per-pupil spending.

Proposition 301, an initiative approved by voters in 2000, increased the state sales tax by six-tenth of one percent, with revenues directed to education. The governor and Legislature in 2018 extended Proposition 301 for an additional 20 years.

Proposition 123, which voters passed in 2016, increased by $3.5 billion allocations from the State Land Trust to be spent on education.

Following the passage of Proposition 123, Gov. Doug Ducey and the state Legislature expanded teacher salaries and per-pupil spending in 2018, 2019, and 2020. The “” plain raised teacher salaries across the state by an average 20%, also investing in resources such as:

• School Infrastructure 
• Textbooks 
• Modernizing Curriculum 
• Updating Technology 
• School Buses

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