Arizona Democrats want Ducey to stop trying to overturn new education tax

PHOENIX — Four Arizona Democrats have sent a letter to Gov. Doug Ducey urging him to halt efforts to fully or partially repeal a tax hike approved by voters last year to boost school funding.

Proposition 208, also known as the Invest in Ed initiative, imposes a 3.5% income tax surcharge on personal income for those who earn more than $250,000 and couples whose income exceeds $500,000 with payments on the tax now in effect being due beginning in April 2022.

The letter signed by Reps. Ruben Gallego, Raúl Grijalva, Greg Stanton and Ann Kirkpatrick said voiding Prop 208 would be in “contravention of the will of a majority of Arizonans who voted for its enactment.”

“A full or partial repeal would also devastate Arizona’s public schools, which have already struggled during this pandemic due in part to your administration’s refusal to provide sufficient relief to local education agencies,” the letter read.

“Proposition 208 is essential to allowing our public schools to recover and thrive.”

The initiative, approved by a difference of approximately 113,000 votes, will be used to hire and increase the salaries of teachers, nurses, counselors, classroom aides and bus drivers; along with expanding career and technical education programs in addition to mentoring and retention programs for new teachers.

Ducey, a strong opponent of the initiative, has vowed to see Prop 208’s tax canceled through the courts or the GOP-controlled state Legislature as he said the new initiative will make the state’s tax code uncompetitive.

“Prop 208 promised additional dollars to K-12 education. I had no problem with that at all,” Ducey said. “But what it also did is took our top tier tax rate from 4.5% to 8%. It was a 77% increase. That I have real issues with.”

An Arizona House committee last week advanced a measure in a party-line vote that has already passed the Senate which would allow successful business owners to avoid paying the income tax hike, which is estimated to cut a third or more of the $827 million the Prop 208 tax was expected to generate.

Proposed by Sen. J.D. Mesnard, a Republican from Chandler, SB1783, would create a workaround of the tax hike by setting up an optional new tax structure for businesses.

Owners would be allowed to pay personal income taxes on the profits they earn from the business, giving owners who make enough to be affected by the tax hike an option to pay a 4.5% tax rate, the same as before the 3.5% surcharge was imposed.

Wages that are not tied to business ownership would be unaffected.

The bill could come up for a vote in the House as soon as this week.

A challenge of the tax will also be heard by the state Supreme Court on April 20, where a majority of the justices were appointed by Ducey.

The Associated Press contributed to this report.

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