PHOENIX — Arizonans will not get a chance to decide in the November election whether to hike taxes on the rich to generate more money for education.
In an order Wednesday, the Arizona Supreme Court said initiative petition signers were not informed that the measure would do more than increase the tax rate on people earning more than $250,000 a year. It also would eliminate the indexing of income tax brackets to account for inflation.
Chief Justice Scott Bales, writing for the court majority, said that omission “creates a significant danger of confusion or unfairness.”
The ruling is a significant setback for teachers and others who pushed for the “Invest in Ed” initiative, and not just because it means there will not be a dedicated revenue stream for public education. They hoped that having the measure on the ballot would bring out voters who would also support candidates willing to put more money into public schools.
“I hope that people don’t go, ‘Oh, this isn’t on the ballot, I’m not going to participate in November,’” said Joshua Buckley, chairman of the Invest in Ed initiative and a Mesa teacher. “I’m hoping that educators and public school advocates are still fired up.”
Wednesday’s ruling is a victory for the Arizona Chamber of Commerce and Industry, which led and financed the legal fight to block a public vote on the initiative.
Chamber president Glenn Hamer argued that increasing income taxes on the wealthiest Arizonans “would just create a drag on the state’s overall economy.” He said that if the state targets the rich, many would just choose to move elsewhere.
The main provision of the measure would have imposed an 8 percent state income tax on earnings of more than $250,000 for individuals and $500,000 for couples. That compares with the current 4.54 percent rate.
It also would have put a 9 percent tax rate on income over $500,000 for individuals and $1 million for married couples filing jointly.
Proponents estimated that the additional taxes would generate about $690 million a year for public education.
In crafting the language for those new tax brackets, the initiative organizers spelled out the rates for all brackets. That’s where the problem arose.
The initiative wording inadvertently reset the cut points between brackets to where they were in 2014, before the Republican-controlled Legislature voted to index the brackets each year to ensure that Arizonans whose income went up no faster than inflation did not end up in higher tax brackets.
For example, in 2014 the break point between the 3.36 percent and 4.24 percent tax rate was $50,000; for 2017 the indexing moved that up to $51,721.
Legislative budget analysts said the immediate impact of repealing indexing would be a $49 million hit to taxpayers, most of them making far less than $250,000.
Potentially more significant, the language would have eliminated future indexing and the inflation protection that is supposed to come with that.
Invest in Ed attorney Jim Barton argued, unsuccessfully, that the initiative would have left indexing in place.
That paved the way for the Supreme Court to take a closer look at how the initiative was described to the approximately 270,000 people who signed petitions to put the issue on the November ballot.
Bales pointed out that the change in indexing was never mentioned in the legally required 100-word description that must accompany each petition.
“The description is inadequate under the statute,” the chief justice wrote.
In tossing the measure from the ballot, the justices sidestepped the validity of a 2017 law that says initiative petitions must be in “strict compliance” with all election laws. That was designed by GOP lawmakers, at the behest of the Chamber of Commerce, to override prior court rulings which said people proposing their own laws need only “substantial compliance” and that minor technical errors should not keep an issue off the ballot.
In a ruling earlier this month on this initiative, Maricopa County Superior Court Judge James Smith concluded legislators acted illegally in changing the standard.
Bales, in ruling the measure off the ballot, said it was not necessary for him or his colleagues to review that issue.
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