In case you missed it, the Arizona Republic Editorial Board on Sunday released this editorial urging Arizonans to vote NO on Proposition 208.
Starved for years, Arizona schools remain undernourished.
The state has among the largest class sizes in the country, a nation-worst student-counselor ratio of more than 900 to 1, and districts short of nurses, librarians, aides and other support staff.
The crisis is most evident in the continued shortage of certified teachers in classrooms; a survey of schools document more than 1,700 positions that remain unfilled this year alone.
Proposition 208 promises to change much of that, by imposing a 78% tax increase on individual income above $250,000 (and household income above $500,000). It raises the top marginal tax rate from 4.5% to 8%.
An architect of the plan says passage of the ballot measure would mean reduced class sizes, diminished teacher shortage and markedly improved student achievement.
We wish it were so.
Because Prop. 208 is far from the solution.
It is an extreme proposal with more pitfalls than promise, that deepens the divisions in our society and puts the state’s economy at risk.
The ballot initiative won’t generate the $940 million backers project.
An analysis by the Joint Legislative Budget Committee, a nonpartisan office, puts the figure closer to $827 million. And even that estimate comes with caveats that could further reduce actual revenue.
The tax increase threatens Arizona’s economic well-being by targeting a segment of taxpayers who create and sustain jobs.
A study by the Goldwater Institute estimates that more than half of the roughly 90,000 tax filers affected by the new tax are operators of small businesses — the backbone of our economy. The researchers project that tens of thousands of jobs and about $2.4 billion in taxes would be lost over the next decade if Prop. 208 passes.
Proponents of 208 argue that the tax hit on small business is manageable, and considerably less for mom-and-pop operations that barely meet the threshold. But a successful 208 will draw imitators, special-interest groups that will want higher-income earners to bear the burden of their pet cause, knowing you can get middle and lower-income voters to support big-ticket initiatives that won’t cost them a dime. Pretty soon we will be punishing the job creators in our community and they will exercise their options.
If you don’t believe that, pay attention to the otherwise tax-friendly Democratic governors of New York and California who are pushing back against the latest efforts to tax the rich in their states.
Even if you question the specific estimates on Prop. 208, there’s no argument that the big tax hike will dampen growth. Businesses use capital to reinvest, including pay and benefits to keep workers or to add to the workforce. Take away part of that capital and businesses will find a way to make it up.
Those who don’t will find ways to shift income elsewhere to avoid or minimize the effect of the new tax.
The assumptions are not just ours. The nonpartisan JLBC staff points to these scenarios as its caveats that could drive down the $827 million estimate.
Even presuming the revenue is real, there’s no guarantee it could be sustained. The COVID- 19 pandemic looms over all things fiscal.
Nor is the assurance this money will solve the many challenges in our K-12 education system. In recent years, Gov. Doug Ducey and the Legislature have made strong progress, some obviously spurred by impending teacher strikes, to restore the $2 billion-plus in education funding lost following the Great Recession.
Yet with that huge infusion that includes money for a 20% raise for teachers and additional assistance, many of the aforementioned woes continue, albeit lessened.
It’s difficult to believe this smaller infusion will wipe away the inadequacies.
This board has been a champion of public education and investment in it. We remain so.
Quality instruction improves our readiness for the changing economy. It provides employers and families with incentives to relocate. It boosts our bottom line. It is the tide that lifts all boats.
We firmly believe schools deserve more money, probably more than what Prop. 208 seeks.
We believe the governor and state lawmakers, and the business community, should have done more. Prop. 208 was more than three years in the making. It was booted off the 2018 ballot by the courts over faulty language – and allowed to become, through inaction, the only education-funding proposal before voters. That’s not lost on us.
Nonetheless, the proposition is badly flawed. What amounts to a populist idea – taxing the rich was arrived at via poll testing – is not just a bad practice but a dangerous one.
It increases the rancor and divide in our political decision-making by adding class warfare. We get that high earners can absorb the tax burden better than most. It’s undoubtedly easier to rally support for schools by having someone else pay.
But does that strike you as fair, when education is a public good and a responsibility we all bear? On this issue, unfairness has consequences. Passage of Prop. 208 could blow up the important and long-standing relationship between the education and business communities. There is almost universal support in the business community for giving education priority in appropriations from existing tax revenues. That’s now at risk.
Business leaders stood on the side of education on funding, including the Prop. 301 sales-tax in 2000 and the extension of it two years ago. As they did on Prop. 123 in 2016 that Ducey brokered to settle an education-funding lawsuit. But business is deeply opposed to the class warfare and new taxes Prop. 208 would propagate.
Further, if Republicans keep the Legislature, the education community will certainly jeopardize legislative support for prioritizing K-12 education funding. Over time, that could cost K-12 more funding, and perhaps much more funding, than Prop. 208 will add.
Business and education are inextricably linked. Education is the pipeline to productive labor. Prop. 208 would pit business and education against each other.
We believe that the backers of Prop. 208 and the business and political leadership can forge a better, more sustainable plan, a plan involving multiple sources of revenue that injects much needed additional money without putting Arizona in peril. A plan that requires all of us, not just a narrow segment, to pay our fair share to properly fund Arizona’s public schools.
We believe a proposal forged in collaboration and compromise will better serve schools and students.
We recommend a “no” vote on Proposition 208.