Arizona has a rich history of sheltering its citizens from reckless tax increases. In 1992, voters passed Proposition 108, a constitutional guarantee to prevent abusive tax increases by requiring two-thirds of the Legislature to approve any new tax levies.
Meanwhile, Gov. Jan Brewer is proud of her record fending off Washington. After the federal health care law was passed, Governor Brewer was one of the first governors to push back against the federally mandated Medicaid expansion.
Thanks to the 2012 Supreme Court ruling, states no longer are required to expand Medicaid under Obamacare. So it was surprising when the governor decided to sacrifice that former taste for breakfast scorpions — and the state Constitution — to stick Arizonans with an unconstitutional tax expanding AHCCCS, Arizona’s Medicaid program.
This spring the governor and supporters of Medicaid expansion proposed to fund Arizona’s share of the massive new program by charging a “provider tax” to hospitals, but advocates were unable to garner the required two-thirds legislative support. In moves reminiscent of Obamacare’s passage through Congress in 2010, expansion advocates orchestrated a special session in the middle of the night, and suspended rules requiring the expansion proposal to go through committees before being considered by the full Legislature.
When the bill passed, instead of complying with the Constitution, supporters ceded to an appointed administrator the power to levy taxes, a job the state’s Constitution specifically entrusts to the people’s representatives. Even worse, this administrator, AHCCCS Director Tom Betlach, has full discretion to set the amount of the tax and to decide who has to pay and who will be exempt.
Attempting to evade the Constitution in this way ensures that the true beneficiaries of Arizona’s Medicaid expansion are not the people, but the politically connected hospitals that lobbied to line their pockets. But thanks to Prop. 108, this move is also illegal. That’s why the Goldwater Institute is representing 36 legislators whose votes against Medicaid expansion should have defeated the bill but were effectively nullified when the expansion bill became law without the constitutionally required two-thirds approval.
Arizona was built on the principles of self-government. To protect the people from an unaccountable bureaucracy, the Arizona Constitution reserves the lawmaking power to elected legislators, whose decisions are subject to review by the other branches. Ignoring restrictions on the taxing power and yielding control to independent officials eviscerates these checks and balances, inviting uncertainty and paving the way for special interest groups to hijack the lawmaking process.
Expansion proponents have said in recent days that the “provider tax” is not a tax, but a fee (there’s that Obamacare déjà vu again), and that it is therefore constitutional under a narrow Prop. 108 exception for “fees and assessments that are authorized by a statute, but are not prescribed by formula, amount or limit, and are set by a state officer or agency.”
Arizona courts have never interpreted this exception, but if it were construed broadly to encompass the provider tax, the exception would swallow the rule. The provider tax is not a fee paid or assessment charged in exchange for a privilege or benefit. It is by definition a broad-based mandatory tax levied on hospitals regardless of whether they receive Medicaid payments. As Rep. John Kavanagh jabbed, “Calling a tax an assessment doesn’t make it any less a tax. It just makes it a hidden tax.”
Moreover, even in the case of fees, Prop. 108 still requires the Legislature to garner a two-thirds majority to authorize an administrator to collect the fee. Here, in the case of Medicaid expansion, AHCCCS Director Betlach has been given broad authority to collect a tax, set rates and approve exemptions with only a simple majority of legislators approving that power.
Medicaid expansion proponents lament that subjecting the provider tax to the supermajority requirements makes expansion unfeasible, but it is precisely when contemplating politically and emotionally charged issues such as this one that constitutional protections are needed most. Voters enacted Prop. 108 to “make it more difficult to raise taxes” even when legislators are “respond[ing] to emergency situations, court directives and federal requirements.” Prop. 108 protects Arizonans from taxation without adequate representation.
There are ways to extend health insurance coverage to those who lack it without violating the Constitution, but unfortunately the governor and a majority of legislators chose to do so through unconstitutional means that will set a disastrous future precedent. If this legislation is not stopped by the court, there will be nothing to prevent runaway abuse of Prop. 108 protections from becoming politics-as-usual in the Grand Canyon State.
— Christina Sandefur, attorney for the Goldwater Institute.