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Pro-tax-increase ad campaign swings and misses

A batter in baseball going 0 for 3 at the plate is the equivalent of a rough day at the office. When a political campaign goes 0 for 3, it鈥檚 the equivalent of getting sent down to the minors. 

Based on its three TV ads, the pro-Proposition 208 campaign should start packing its bags. 

If passed, Proposition 208 would take the state鈥檚 top individual income tax rate from 4.5% to 8%, a 77.7% increase. 

That鈥檚 not some obscure aspect of the initiative buried deep in the text; it鈥檚 the initiative鈥檚 central provision.  

You wouldn鈥檛 know that, though, by watching the proponents鈥 ads. After several weeks of ads with Hollywood-level production values, not once has the pro-208 campaign disclosed to Arizonans that the initiative is asking voters to approve the biggest permanent tax increase in the state鈥檚 history.  

The ads also have yet to mention who the tax increase impacts. It鈥檚 not just a handful of wealthy tax filers, but rather the small businesses that power the Arizona economy and that will prove indispensable in Arizona鈥檚 post-pandemic economic recovery. After all, small businesses pay their taxes on the individual portion of the tax code. If Proposition 208 passes, their top tax rate will be even higher than Fortune 500 companies.  

Research papers from the Goldwater Institute and the Arizona Tax Research Association have zeroed in on the extent to which Arizona small businesses get walloped by Proposition 208鈥檚 tax increase.  

鈥淎n analysis of IRS data鈥攕upplemented by additional modeling and adjustments to identify only those Arizona taxpayers directly affected by the rate increase鈥 reveals an estimated 90,000 Arizona tax filers who will be affected. Of these, more than 50% would be small business owners,鈥  by Goldwater鈥檚 director of education policy, Matt Beinenburg, and senior fellow Jim Rounds.  

As ATRA鈥檚 Sean McCarthy , those small businesses are job creators. 鈥淔ifty-eight percent of Arizonans in the private sector work for a business that pays its income taxes via the IIT (individual income tax).鈥 

A higher tax burden for these small businesses means depriving them of working capital (as  by Republic columnist Bob Robb) that they can use to hire new employees and make the investments in things like machinery and equipment that have led to Arizona having one of the country鈥檚 strongest, most dynamic economies and where, pre-pandemic, one of our toughest challenges was finding qualified workers to fill available positions.  

The proponents attempt to argue that the initiative delivers when it comes to accountability, but here again they swing and miss. Proposition 208鈥檚 definitions are so expansive as to who鈥檚 eligible for funding that there鈥檚 no guarantee new dollars will reach teachers. Never mind that Proposition 208 depends on the most volatile segment of state tax revenues. No district would base its budgets or teacher pay contracts on the slice of the tax pie that experiences the wildest fluctuations. As ATRA鈥檚 McCarthy details, the first year of the great recession saw revenues in these brackets plunge more than 30% due to cratering business profits. If school districts are banking on these revenues, then they鈥檙e in for a wild鈥攁nd disappointing鈥攔ide.   

Proposition 208鈥檚 ad makers have a difficult task on their hands. They鈥檙e attempting to sell a huge permanent tax increase on small businesses that falls far short of delivering for teachers, and they鈥檙e attempting to do so in the middle of a pandemic. If their first three spots are any indication, we can expect more glitzy productions between now and Election Day, but very little straight talk.  

Glenn Hamer is president and CEO of the Arizona 小红帽直播app of Commerce and Industry. 

Glenn Hamer

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