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Tax increase proposal will derail state’s economic recovery

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Looking to exploit the momentum created by the recent school strike, a small coalition of liberal organizations and labor unions have launched a ballot initiative that would permanently damage Arizona’s economy.

The proposed “Invest in Education” proposition would impose a new top individual income tax bracket of 9 percent, a near doubling of the current top rate of 4.54 percent. This radical increase would give Arizona the fifth highest income tax rate in the nation, trailing only California, Hawaii, Oregon and Minnesota.

Joining the ranks of the high-income tax states would be a decision that Arizona would quickly come to regret. The evidence is overwhelming — states with a low or no income tax have consistently outperformed high tax states in job creation and economic growth.

It is why for decades Americans have been voting with their feet and moving to states like Arizona with a favorable tax climate. On net, nearly 1,000 people a day are migrating to low income tax states, while the same number is exiting high tax states. If this initiative passes, we should expect entrepreneurs, high earners and employers to take their jobs and investments elsewhere.

To justify their crushing tax hike, proponents are promising that the approximately $700 million in anticipated new revenue from the tax will go toward K-12 funding.  Of course, the initiative doesn’t include any language that ensures the money will make it into the classroom, nor does it include any reforms to improve outcomes or parental satisfaction.

They are also selling their plan on the idea that only the “rich” will pay the tax increase. In reality, small business owners and entrepreneurs will be hammered by the increase since they pay their taxes through the individual tax code.

Also unmentioned by the proponents of the initiative is that a new revenue stream for schools is no longer needed. While the Red for Ed debate was raging on at the Legislature and in living rooms this spring, economic forecasts confirmed that Arizona would have the largest budget surplus since the Great Recession.

This tremendous news is not an accident. The rapid acceleration of projected revenue is a direct result of both local and national policies that fostered a pro-growth economic environment in Arizona. It can be argued that lawmakers reacted too slowly during the legislative session to allocate new funding into K-12 classrooms (close to $1 billion), but it illustrated that the best mechanism to generate more money for schools is through economic growth, not job crushing tax increases.

The impact of the largest tax increase in Arizona history would be catastrophic. It will kill jobs, punish small business owners and send families fleeing to other states. The proponents of this measure might think they are being clever by linking two politically attractive targets — school funding and taxing the “rich” — but we are confident that voters will see through their ploy and reject this divisive initiative if it reaches the ballot.

— Scot Mussi is president of the Arizona Free Enterprise Club.

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The views expressed in guest commentaries are those of the author and are not the views of the Arizona Capitol Times.

6 comments

  1. Arizona Eagletarian

    I wonder how Mr Mussi explains the case history which is Minnesota and its economy.

  2. L Douglas Peters

    Mr Mussi fails to detail just how public schools will be properly funded. We all want and deserve services and those services have to be paid for by citizens. There are only four main revenue sources for the General Fund in Arizona. In order of contribution they are: personal income tax, sales tax, corporate income tax, and insurance premium tax. The constant cutting of tax revenues by Ducey and the Republican controlled legislature have resulted in massive funding shortfalls as evidenced by the public school funding crisis. Arizona ranks just about dead last in public school funding. Had it not been for the Red for Ed movement Ducey would have stuck to his my-way-or the-highway 1% increase for teachers. Mr. Mussi also fails to account for the fact that businesses moving into Arizona expect that there be an educated workforce and that their workers enjoy robust services.

  3. The proposals are for small, around 2.5 to 4% increases to the personal income taxes for those earning more than 250,000 per year. I do not consider these to be “crushing tax increases”. I believe that a combination of income tax, and sales tax would be fair. I do not think property taxes should be increased as they are already moderate, and many people on fixed incomes are seeing their assessed valuations rise and rise, when they do not wish to sell and move, due to the greed of house flippers. Small businesses and “entrepreneurs” also require an educated workforce, and these modest increase will not “hammer” them. I do not find Mr. Mussi’s arguments convincing. School funding is needed both in good and lean times. Money is not the answer to all problems but there are some problems which cannot be solved without it. These so-called job-creators can leave the state, but so can teachers. I feel that others will take their place in either case.

  4. It is fiscally irresponsible to finance education funding (or any funding) through future economic growth.

    One does not qualify for a mortgage by listing rent money from future roommates as a source of income.

  5. Education is everyone’s responsibility, not just those with more resources….To single out one source of income to Tax is wrong and is a Socialist approach.

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