Arizona’s Proposition 208 tax hike could be voided if new lawsuits succeed


Proposition 208, Arizona’s most recently approved tax increase, could be voided if a pair of legal challenges succeed.

Once Arizona’s voter-approved tax increase on higher earners was certified by state leaders as having succeeded on Nov. 3, two groups filed challenges.

One lawsuit was filed by the nonprofit Goldwater Institute representing House Speaker Rusty Bowers, R-Mesa, Senate President Karen Fann, R-Prescott, the nonprofit Arizona Free Enterprise Club, and others.

Another, filed by the Rose Law Group, represents a local business owner and a former county judge.

Both allege that the Invest in Education ballot initiative is an unconstitutional tax hike.

“Arizona’s Constitution gives voters the power to pass initiatives, but it also imposes important limits on the initiative power,” said Timothy Sandefur, Goldwater Institute Vice President for Litigation. “In fact, the state Constitution expressly provides that ‘any law which may not be enacted by the Legislature under this Constitution shall not be enacted by the people.’ And the Constitution limits both how taxes may be raised and how government may spend money. Proposition 208, however, ignores or tries to evade these limits.”

Goldwater said Proposition 208 is not a constitutional amendment, rather an ordinary law that must abide by constitutional requirements governing taxation and local spending. They said taxation powers are an exclusive power of the state Legislature.

Save Our Schools Arizona, one of the principal backers of Prop. 208, responded to The Center Square Tuesday.

“We're disappointed to see high-dollar special interests are continuing to pursue any means necessary to both reject the will of Arizona voters and undermine the public schools 95 percent of families choose,” said Co-founder Dawn Penich-Thacker. “This lawsuit is a Hail Mary by folks who seem to care more about private greed than the public good, but we're confident the interests of most Arizonans will prevail yet again.”

The initiative passed by a 51.75% to 48.25% margin on Nov. 3.

If it survives the legal challenges, Prop. 208 would impose a 3.5% tax surcharge on income over $250,000 for individuals and small businesses filing as pass-throughs.

“Prop 208 will have a devastating impact on our economy, small business owners and entrepreneurs struggling through the pandemic,” Arizona Free Enterprise Club President Scot Mussi said. “We don’t believe that this was good policy for the state, and also believe that several provisions in the measure violated Arizona’s Constitution. Small business owners should not be subject to an unconstitutional tax, which is why we are suing to stop this initiative from going into effect.”

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