One of the ballot propositions on the ballot for Nov. 3 is Prop 208. This voter initiative is being billed as a way to find new funding for the state’s schools by increasing the income tax on the state’s wealthiest taxpayers.
It is sometimes called the “Invest in Education Act.”
Opponents say Prop 208's tax increase will hurt small business that have already been hurt by the coronavirus pandemic.
The proposition is in response to the cuts in state funding for education that have occurred since the 2008 recession. Most of these funds have not been restored in the years since. Many school districts around the state have found themselves scrambling for funds.
Teacher salaries are also an issue in Arizona. This was the cause for the “Red for Ed” demonstrations in 2018. While salaries have been increased in recent years, they still lag behind the national average. There are serious concerns about the state’s schools being able to attract and retain teachers.
U.S. News & World Report ranks Arizona 44th among the states for K-12 education.
What would Prop 208 do?
According to the Ballotpedia website, a “yes” vote would add a 3.5 percent income tax, in addition to the current tax (4.5 percent in 2020) on annual incomes over $250,000 for single filers or $500,000 for joint filers. This would raise the maximum state income tax rate to 8 percent.
ABC10 in Tucson said this would affect 1 percent of the state’s taxpayers.
The new revenue would be distributed to teacher and classroom support staff salaries, teacher mentoring and retention programs, career and technical education programs, and the Arizona Teachers Academy.
Ballotpedia said a “no” vote would keep the highest income tax rate at 4.5 percent (as it is in 2020) on annual incomes above $159,000 for single filers and $318,000 for those filing jointly.
The main organization supporting Prop 208 is Invest in Education, which is also known as Yes on 208. Amber Gould, a high school teacher, is head of the Arizona Chapter of the National Education Association and is the chairperson of Invest in Education.
Supporters include most of the state’s Democratic state legislators and State School Superintendent Kathy Hoffman, who is also a Democrat. Organizations in support include the Arizona AFL-CIO, the Arizona Interfaith Network, Stand for Children, Inc.; the Arizona Education Association, and the Children’s Action Network.
On the State Press website, former state legislator and current Director for the Arizona Center for Economic Progress said Prop 208 would generate $112 million annually in new revenue for Arizona school for career-technical education and mental health care in the schools.
Opponents to the proposition say it comes at a bad time, among other things. Arizonans for Great Schools and a Strong Economy, which is also known as No on 208, the group leading the opposition to the proposal, said this would further hurt small businesses that are already hurting from the coronavirus pandemic.
Garrick Taylor, spokesperson for No on 208, told the State Press website, “Prop 208 comes at the worst possible time, as we are in the midst of a pandemic that has hobbled the state's and nation's economy.”
Taylor is Executive Vice President of the Arizona Chamber of Commerce and Industry. He said businesses in Arizona have done a lot for schools in the form of partnerships and support for Prop 123, a sales tax increase that was earmarked for the schools.
Chad Heinrich, the director of the National Federation of Independent Businesses in Arizona, noted many small businesses do not pay corporate income tax. Rather, they pay taxes on their business revenue and profits through their personal income taxes.
Heinrich has said Prop 208 should be called “The Small Business Destruction Act.”
On their website, No on 208 described this as the “Wrong tax, wrong time.” They said just 55 cents of every dollar spent on education goes into the classroom.
They claim further that 50 percent of this tax would be paid for by small businesses, and they would be paying at a higher rate (8 percent) than big corporations (4.9 percent).
No on 208 also noted that those individuals and couples affected by this tax would be seeing an increase of 77 percent in their taxes.
State Treasurer Kimberly Yee, a Republican, has stated her opposition to Prop 208. She appeared in a video posted Sept. 29 on You Tube opposing the proposition. In postings on Twitter, she said the state has already increased funding for education and teacher salaries. In a posting dated Oct. 1, she said Prop 208 would hurt small businesses.
“Small business owners pay on the individual portion of our tax code, not the corporate side,” Yee said. “Prop 208 will raise our top tax bracket by 77.7 percent. Some @smallbiz owners will be subject to higher taxes than large corporations.”
Gov. Doug Ducey, also a Republican, has voiced his opposition to Prop 208.
Among the groups opposing Prop 208 are Americans for Tax Reform, the Arizona Lodging & Tourism Association, the Arizona Small Business Association, the National Federation of Small Business, the Arizona Manufacturers Council, and the Arizona Tax Research Association.
Arguments for and against Prop 208 will be included in election publicity books being mailed to registered Arizona voters.