Tax and Spend: Arizona’s Battle Over Proposition 208 Goes to the Courts

Last year, as part of their efforts to expand government subsidies to teacher unions, progressives across the country targeted Arizona’s ballot box with an unusual initiative to impose a potentially devastating new income tax on the state. Fortunately, the Arizona Supreme Court effectively ruled the initiative unconstitutional last month. But the ruling won’t stop progressives from targeting other states.

Euphemistically called “Invest in Education,” Arizona’s Proposition 208 levied a burdensome tax “surcharge” that would have nearly doubled income taxes on anyone earning more than $250,000 — which sounds like a high figure until one realizes that it didn’t distinguish between the personal income and the business income of small-business owners, and included no provision to adjust for inflation. That meant owners of small businesses — the chief employer in Arizona, as in all other states — were deemed “rich” (as in “tax the”) based not on their actual earnings, but on how much their business earned.

The initiative also forced the state to send this money to school districts without regard to what the legislature was already spending on education. In other words, Prop. 208 imposed a devastating new tax on the state’s primary generator of economic growth and then deprived the legislature of power to make responsible funding decisions.

Prop. 208 marked the climax of years of agitation that first peaked in 2018 when activists staged an illegal strike to close the state’s schools and then tried to ram through their massive tax increase on Arizonans via an initiative just months later. The state’s Supreme Court threw this first attempted money grab off the ballot, ruling that the Yes campaign was fudging the numbers in voter-information materials. The second time around, however, the “Invest in Education” tax hike was narrowly adopted as Prop. 208 on the November 2020 ballot, thanks to the backers’ false claims that state lawmakers were depriving schools of funding.

Read the rest of the op-ed at the National Review.

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

Matt Beienburg is the Director of Education Policy and the Director of the Van Sittert Center for Constitutional Advocacy at the Goldwater Institute.