Goldwater Defends Tax Reform in Arizona

October 21, 2021
By Timothy Sandefur

The Goldwater Institute today filed a friend-of-the-court brief to defend Arizona’s recently adopted tax relief legislation against legal attacks by progressives who have sought to use the referendum process to have those tax cuts repealed.

The case, which involves the same group responsible for the state’s recent Proposition 208 tax hike, concerns whether the state Constitution’s referendum procedure—whereby voters can repeal laws adopted by the Arizona Legislature—applies to legislation that raises revenues or spends money to maintain departments of the state government. But as our brief explains, the question also concerns the so-called Voter Protection Act (VPA), a provision of the Constitution that basically makes all initiatives—and all referenda—unrepealable.

Arizona’s Constitution says that all legislation is subject to referendum—meaning voters can repeal it—except laws “for the support and maintenance of the departments of the state government and state institutions.” That language was added when the Constitution was written in 1910, in order to avoid the fiascos that had resulted in Oregon, where the referendum power was so broad that voters caused financial chaos in the state. Under Arizona’s Constitution, tax laws designed to raise revenue for state institutions—such as schools—cannot be repealed by referendum. Yet pro-tax forces have launched a referendum effort to repeal the state’s recent adopted tax relief, including the flat tax enacted just months ago. Our friends at the Arizona Free Enterprise Club filed suit to block that unconstitutional use of the referendum power—and our brief expands on their arguments.

As our brief points out, there’s an additional complication: The VPA essentially forbids the Legislature from repealing or even altering any initiative or referendum. Not only that, but the Legislature is prohibited from enacting a law that is inconsistent with an initiative or referendum. What exactly that would mean in the context of a tax cut is unclear, because no court has ever addressed the question. But it would seem to mean, if a tax cut is voided by a referendum, and the Legislature can never adopt laws inconsistent with that voiding, that the Legislature would be barred from ever enacting tax cuts—or perhaps even tax increases—in the future.

That would be a bizarre consequence, indeed—which is all the more reason that the courts should heed the constitutional prohibition on referendums for laws “for the support and maintenance of the departments of the state.”

You can read our brief here.

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