Last November, Arizona voters overwhelmingly approved Prop 208, a measure that levied a 3.5 percent tax on individuals earning over $250,000 and on married couples making more than $500,000. The revenues would go towards teacher and support staff salaries, as well as technical education and training programs.
But Republican lawmakers moved quickly to try to undercut the ballot measure. The Republican-controlled legislature approved a budget that tosses Arizona's progressive income tax system and replaces it with a phased-in 2.5 percent flat tax — amounting to a $1.9 billion tax cut, per the Associated Press. The spending package also capped the combined tax rate for high-income earners subject to the Prop 208 surcharge at 4.5 percent, meaning that they would only pay 1 percent in taxes in addition to the education tax. Governor Doug Ducey signed the tax cut into law on Wednesday.
In a statement released after he signed the legislation, Ducey said that "each and every Arizona taxpayer" will see their taxes cut and that "job creators will continue to choose our state to expand operations." He also claimed in a different statement that the tax plan would "protect small businesses" from the "devastating" impacts of Prop 208.
Proponents of Prop 208 argue that the new tax system amounts to a hand-out for wealthy Arizonans that also slashes funding for public services. They want to scrap the scheme and are hoping that voters will agree with them.
The two referendums, which were filed earlier this afternoon with the Arizona Secretary of State's Office, would repeal the new flat tax system, as well as the 4.5 percent tax cap that effectively kneecaps Prop 208. The backers of the referendums, including Stand for Children and the Arizona Education Association, need to get almost 119,000 signatures by September 28 to qualify for the November 2022 ballot.
The referendum process is enshrined in the Arizona State Constitution. A law, or a component of a law, can be vetoed by voters at the ballot box if enough signatures are submitted to the Secretary of State's Office within 90 days of the end of the legislative session during which the law was passed. While basic initiatives require 237,645 signatures to get on the ballot, referendums only need 118,823.
"Clearly the voters want more education funding, they wanted more revenue for the state," Rebecca Gau, executive director of Stand for Children, told Phoenix New Times. "Now you have 47 legislators and one governor trying to significantly reduce the amount of revenue that voters wanted to see go to education."
"There is a moral imperative to honor the will of the voters and stop these sneaky schemes just because they’re angry that they lost an election," she added. "We’ve been continuously nickel and dimed by this legislature and this governor and they’ve done it again. It’s unconscionable."
Most Arizonans are likely to see minimal savings from the new flat tax system, according to the Legislature's own fiscal analysts. People earning between $30,000 and $40,000 annually will get a $17 tax cut, while the mega-rich, those earning over $5 million annually, take home an extra $350,303 under the new system, according to the Joint Legislative Budget Committee.
"Unless you're a millionaire, you probably won’t see much of a tax cut," said David Lujan, President and CEO of Children's Action Alliance, another group that backed Prop 208 and is supporting the referendum effort. "You will feel the impact in less funding for public education and other priorities that Arizonans care about."
Gau said that legal action is also being considered as a way to stop the new tax system but nothing has been "finalized" yet.
"It’s ridiculous to suggest that the state needs tax cuts for the uber-wealthy and crumbs for everybody else while our schools are crumbling," she added. "Our coalition is fired up."