PHOENIX (AP) – A new voter-approved tax on high-income Arizona people that will increase spending on education is firmly in the sights of Gov. Doug Ducey, and Republican vows Friday to cancel new tax on education. Proposition 208 through the courts or GOP-controlled Legislature.
Ducey told the Valley Partnership business group he has been advising people who ask him about the new 3.5% surcharge on wealth income they expect to bring their investments to other states as payments from the ‘Current tax will not be paid until April 2022 Meanwhile, he is working to kill the measure and set out his dual strategy to do just that.
Business groups and the Republican-led legislature are challenging the new tax, and Ducey noted that the state Supreme Court has expedited that effort by accepting the case before it can be heard by a trial court. Ducey filed a writ from a friend of the court to urge the court to act, and it will be heard on April 20th. Ducey has appointed the majority of judges.
If that effort fails, Ducey said he is working with House and Senate leaders to find ways to neutralize the new tax, which he said will make the state tax code uncompetitive.
“Proposal 208 promised additional dollars for K-12 education. I had no problem with that, ”Ducey said.“ But what he also did was he took our top-tier tax rate from 4.5% to 8%. It was a 77% increase. I have real problems with that. “
There are several tracks the legislature could take, but one that eliminates about a third of the estimated $ 827 million a year in new revenue has already been passed by the Senate. This measure, from Republican Party Senator JD Mesnar d, creates a new section of tax codes only for small businesses, setting the tax rate above 4.5% but avoiding the 3.5% surcharge.
Arizona small business income is currently taxed on personal tax returns. New tax voters passed in November impose a 3.5% tax surcharge on incomes over $ 250,000 for individuals or more than $ 500,000 for couples. Opponents backed by the Arizona Chamber of Commerce and Industry spent millions trying to convince voters that it would hurt small businesses.
Proponents said the effect of the tax is on homeowners’ income, but Mesnard argued at a February committee hearing that the creation of the new small business tax is fair.
“Obviously, during the campaigns I listened to constantly, the surcharge was not aimed at small businesses, it would not affect small businesses,” he told the Senate Finance Committee. “In many ways, that just encodes that feeling.”
Democratic Sen. Martin Quezada said in a full debate in the Senate that Mesnard’s plan was “a direct attack on the will of voters.”
“That’s another reason voters don’t trust us,” Quezada said. “They work their butts to collect signatures, they put a measure on the ballot that will solve a problem that we have not been able to solve ourselves as legislators. They pass a proposal and we are going to do something like that.”
Other ways to make the new tax less painful for the rich are in a state budget proposal that is being negotiated now, where Republican lawmakers are considering a massive renewal of the tax code, at Ducey’s urging. . His January budget proposal contains a $ 200 million annual tax cut that would rise to $ 600 million over three years. But with a budget surplus of more than $ 1 billion, Republicans in the Senate and House are looking far beyond that number.
Republican Rep. Ben Toma is leading efforts in the House to renew the tax code. His proposal eliminates the current graduated tax brackets and replaces them with a fixed 2.5% tax on all income levels. Under the current progressive tax structure, taxes start at 2.59% on the first $ 26,500 in revenue and increase to a maximum of 4.5% on revenue over $ 159,000.
The flat tax proposal means the rich would see the biggest cuts. Toma said there is also talk of limiting the maximum tax with the Surcharge of Proposition 208 to 5% and using the general fund to offset the difference in the special fund created by the new initiative.
Half of the new wealth tax will be used to increase accredited teachers, 25% to increase the salaries of cafeteria workers, bus drivers and other support staff, and the rest for teacher training, vocational training and other initiatives.
The initiative was the result of a teachers ’strike in 2018 that highlighted the low salaries of educators and a slow rise in budget cuts enacted during the Great Recession. The shutdown ensured higher salaries for teachers, but many educational interest groups said it fell short. A grassroots group was organized to approve the initiative.
Ducey told the Valley Partnership online meeting Friday that he respects the initiative process and the will of voters; he then set out his reasons for removing the measure. And he said he supports more cash for K-12 schools even as he works to eliminate the new tax.
“I think there is a way to fix it or, in a way, to have the dollars available for K-12 education and to maintain our competitive status. One way is judicial, the other way is legislative, ”he said. “And you should see resolution on this and clarity on this issue at some point in the coming months. But it will be this session.”