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Proposition 126 would amend Arizona constitution to ban tax on services

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This week, KTAR News 92.3 FM will highlight the five ballot initiatives that will be on the Arizona ballot for the midterm elections next month. On Tuesday, KTAR News’ Kathy Cline will break down Proposition 126. 

PHOENIX — Proposition 126 would amend the Arizona Constitution to ban a professional services tax on any services that are not taxed as of Dec. 31, 2017.

The ban includes services such as real estate, accounting and health care, such as doctor visits.

The proposition also states that counties and local municipalities cannot get around this by imposing their own professional service tax. However, if local improvements are needed, they could make special assessments.

Supporters argue bad ideas like more taxes are contagious — and must be stopped.

One of those supporters is Sedona-area realtor Holly Mabery. She heads the group Citizens for Fair Tax Policy, which is sponsoring the proposition. (The group is funded by the Realtor Issues Mobilization Fund, which is part of the Arizona Association of Realtors.)

The idea for this, she said, came from a 2016 state legislative attempt to impose a professional services tax, which went nowhere. She said it’s bad enough politicians are always looking for more money — but paying more taxes on services like dog grooming or beauty shop visits is worse.

She said the burden on small-business owners would also increase. “That professional, every month, would have to become a tax collector and forward money to the state,” she said.

Mabery said if future generations want the power to tax services, they could amend the constitution again.

“We really believe in power to the people, and allowing them to make the decision,” she said. “So many times we’re not getting it done, legislatively.”

On the other hand, Prop 126 opponents (Gov. Doug Ducey, among them) feel taking away a potential revenue source is shortsighted.

Max Goshert, a senior research associate with the Grand Canyon Institute, said for the past several decades, Arizona’s economy has shifted from goods to services.

“Sales tax has reduced from bringing in 44 percent of the GDP to now 37 percent over the past two decades,” he said. “That equates to roughly $1 billion each year.”

In addition, Goshert said, there are legislative safeguards in place against tax increases.

“It could be difficult because they do have to get two-thirds of both houses to pass that,” he said. “But, they still have the ability should our economy downturn or should our state revenue need it.”

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