Arizona Income Tax Increase Not on November Ballot

Arizona’s November election ballot will not include a proposal to increase income taxes for K-12 education funding, after the state Supreme Court ruled on August 29 that the “Invest in Ed” measure was not written clearly. It would have raised an additional $690 million in revenue each year.

Proposition 207, which was placed on the ballot after supporters gathered 270,000 signatures, would have raised the top state income tax from 4.54 percent to 9 percent, making Arizona’s income tax one of the highest in the nation:

It’s worth noting that individual income taxes apply not only to individuals but also to small businesses set up as sole proprietorships, partnerships, or other noncorporate forms.

The initiative’s downfall was because it also would have eliminated inflation indexing, by which threshold amounts rise each year with inflation to ensure people are taxed on real income growth, not phantom growth from increases in the price level. The description submitted by supporters did not mention this at all, instead implying the proposal was a tax increase on the rich. State analysts said the $49 million tax increase from abandoning indexing would be mostly paid by those making far less than $250,000. Proponents also argued that the short description’s reference to increasing taxes by 3.46 and 4.46 percent, rather than 3.46 and 4.46 percentage points, was misleading, but that was not the basis for the Court’s decision.

The case was Molera v. Reagan, CV-18-0218-AP/EL (Az. Aug. 29, 2018).