Goldwater Victory Puts an End to Arizona’s Massive Prop. 208 Tax Hike

A Maricopa County judge this morning issued an injunction in the Goldwater Institute’s lawsuit against Proposition 208 which blocks enforcement of the massive tax increase adopted in November 2020. Following instructions from the state’s Supreme Court—which months ago said the initiative’s tax hike must be struck down if the money the initiative raises cannot be spent without exceeding the state’s constitutional limits on government spending—today’s decision concluded that “school district spending more likely than not will exceed the predicted spending limit in 2023,” and declared the entire initiative invalid.

That much should have been clear from the outset. Proposition 208 combined an enormous tax increase with requirements for increased spending on schools (which the initiative’s proponents falsely claimed were starved for funding). That was a problem because the Arizona Constitution caps government spending, to prevent the state from spending itself into California-style debts. So Prop. 208’s proponents tried a clever work-around: they added a provision that purported to exempt the initiative from the Constitution itself—declaring that the money the tax was supposed to raise should not be calculated as part of the legal spending formula.

That was too much for the state Supreme Court, which in August unanimously declared that Prop. 208 must obey the Constitution’s spending limits, not ignore them. And because the initiative combined that tax with mandatory spending, the justices sent the case back to the trial judge with instructions that if the spending required by the initiative crossed the constitutional boundary, the tax should be struck down. After several more months of wrangling, the trial court issued its order today, declaring Proposition 208 invalid in its entirety and putting an end to Arizona’s latest experiment with “ballot-box budgeting.”

Today’s decision comes as a relief not only to the job-creating small businesses in Arizona who were the main targets of this tax increase, but also to Arizonans reluctant to see the state head down the path of over-taxation and over-spending that have undermined so many other states. The safeguards against overspending that Arizona voters added to the state Constitution in the 1990s were designed to prevent special interest groups from taking more of the people’s hard-earned money to fund an ever-growing state bureaucracy. The effort by those special interests who drafted Prop. 208 to immunize themselves from the state’s highest law has therefore rightly fallen short. And that’s a good thing for Arizona’s economy and the rule of law.

Timothy Sandefur is the Vice President for Litigation at the Goldwater Institute.