Court dismisses claims against Prop. 208, one remains

Court dismisses claims against Prop. 208, one remains

(The Center Square) – A Maricopa County Superior Court judge dismissed most of the claims against Proposition 208, which placed a 3.5% income tax surcharge on those in the top-earning bracket in Arizona to fund education.

Judge John Hannah Jr. only left one claim to be taken up by the Arizona Supreme Court about whether the new revenue will put the state’s K-12 schools above a constitutional spending limit.

Hannah dismissed three of the four remaining legal challenges on June 13 that were raised by Senate President Karen Fann, R-Prescott, and the owner of My Sister’s Closet, a local chain of consignment stores, saying the claims failed as a matter of law.

The claims dismissed included a challenge to the ability of voters to raise taxes at the ballot box themselves, a claim that Prop. 208 usurped legislative authority by sending money to schools, and the argument that the initiative restricted the legislature’s taxing and spending authority.

Hannah wrote that he has previously ruled against the claim that a two-thirds majority of the legislature is needed to impose a tax.

“The claim that the Arizona Constitution gives Arizona’s citizens no power to tax themselves through initiative is defeated by the plain text of the document.”

Hannah wrote that the plaintiff’s argument that Prop. 208 infringes on the legislature’s taxing and spending authority fails because the claim misinterprets the legislature’s authority.

“The claim rests on the premise that the Arizona Constitution somehow places the legislature on a higher or more powerful plane than the people acting by initiative,” he said. “It doesn’t.”

The surcharge established by Prop. 208 after the 2020 General Election nearly doubled the income taxes of high-earning Arizonans, requiring those with incomes exceeding $250,000 to pay 8% of their total income. The change resulted in Arizona ranking ninth for the highest top marginal income tax rate in the nation.

Stephen Shadegg, state director of Americans for Prosperity-Arizona, stated the importance of establishing a flat income tax rate in Arizona through House Bill 2900, which would cap the tax rate for those in the highest income bracket at 4.5%.

“The reason for this legislation that we’re putting forward is because of the passage of Prop. 208. It is critical that our small businesses be able to survive and remain competitive,” Shadegg told The Center Square.

He said that if the court rules Prop. 208 to be constitutional, capping the income tax rate at 4.5% will become an even greater priority.

“Ultimately, whichever way the court goes, it just shows the importance of this bill, which is to reduce income tax, and to keep Arizona competitive for small businesses and owners.”

According to Shadegg, Arizona’s five bracket system needs to be returned to a simpler tax.

“A 2.5% tax is the tax reform that we need with the surplus that we have in Arizona,” Shadegg said. “We have the capability to go to a flat tax of 2.5%, which is the lowest in the country and put money back in Arizonans’ hands without having to increase any other taxes, while also increasing funding for education and infrastructure.”

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