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Arizona Income Tax Increase Not on November Ballot

1 min readBy: Joseph Bishop-Henchman

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 taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. from 4.54 percent to 9 percent, making Arizona’s income tax one of the highest in the nation:

Single Filer (double for joint filers) Income Tax Rate under Current Law Income Tax Rate under Proposed Proposition 207
>$0 2.59% 2.59%
>$10,000 2.88% 2.88%
>$25,000 3.36% 3.36%
>$50,000 4.24% 4.24%
>$150,000 4.54% 4.54%
>$250,000 4.54% 8.00%
>$500,000 4.54% 9.00%

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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 indexingInflation indexing refers to automatic cost-of-living adjustments built into tax provisions to keep pace with inflation. Absent these adjustments, income taxes are subject to “bracket creep” and stealth increases on taxpayers, while excise taxes are vulnerable to erosion as taxes expressed in marginal dollars, rather than rates, slowly lose value. , by which threshold amounts rise each year with inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. 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).