I was the first to sound the alarm and urge a no vote on Prop. 126. No on Prop. 126, the false and purposefully misleading Protect Arizona Taxpayers Act.
Today Abe Kwok of The Arizona Republic adds his voice in opposition to Prop. 126. Ban taxes on services? Sounds good, but it could make education funding even tougher:
This being the year of Red for Ed, a tax-the-rich proposal to better fund teacher pay has garnered intense scrutiny.
There is, however, a second ballot measure involving taxes that deserves equal attention: a proposed constitutional amendment dubbed the Protect Arizona Taxpayers Act.
The initiative doesn’t address education funding, per se, but it certainly would close off an option to tap new revenue and to make our tax system broader and fairer.
The initiative would forbid the state to impose a sales tax on services – think everything from accounting and health care to home repairs and haircuts.
And while the Protect Arizona Taxpayers Act may not have earned the kind of scorn facing the Invest in Ed measure, it, too, has reasons to give voters pause.
Don’t be misled by these claims
For one thing, the measure is a pre-emptive strike that relies on half-truths and scare tactics. Proponents contend that there’s a movement afoot across the country to levy taxes on services, and cite Washington, Oklahoma and North Carolina as examples.
On a radio talk show this month, one of the measure’s leaders said Washington’s adoption of such a service tax led Amazon to halt construction of a building there in protest. That is far from accurate.
Seattle proposed a tax on jobs of giant employers, referred to by some as a head tax, to pay for homeless programs. Amazon and other companies threw a fit, the Seattle City Council reduced the tax by almost half, and the skyscraper project is back on track.
There is talk also that the Arizona Legislature itself pushed a bill for a service tax as recently in 2016. That, too, is misleading.
How the House bill was different
It’s true that a House bill was introduced to levy a tax on services, including beauty and nails, pet grooming, child care and so on, but the bill was in conjunction with a proposed cut to income tax rates. That is, the proposal would have restructured taxes but not necessarily raise the tax liability of small or independent business operators. The bill, sponsored by a group of Republicans, went nowhere.
That approach of expanding the tax base – cutting income tax and at the same time imposing a tax on services – is, in fact, what North Carolina [Republicans] enacted and what Protect Arizona Taxpayers is using to scare the public: that consumers will get soaked if they don’t approve the ban.
Check it out yourself and look for the TV commercials on Proposition 126 – replete with an animated heroine figure, P.A.T. (get it?), coming to save the day of an unsuspecting public being pickpocketed by politicians.
Do we really want to tie our hands?
Few tax plans (aside from cuts) are ever winsome. And Prop. 126’s dire warning can scare voters into action.
Missouri in 2016 took the same tact as Protect Arizona Taxpayers. Its Realtors association, joined by other professional and trade groups, spent millions on the same kind of campaign – that everyday services people rely on will get heavily taxed and that consumers would bear the costs. Amendment 4 passed by 14 percentage points.
And no doubt the primary backers behind Proposition 126, the Arizona Association of Realtors, is a formidable power. In 2008, they circulated an initiative to prohibit a real estate transfer tax – the tax was contemplated, too, by some as a way to broaden the tax base – and waged a campaign that won an overwhelming majority of support from voters.
The question Arizonans must ask is, should we eliminate tax options using such a blunt instrument?
Taxes on services are no sacred cow
It is telling that when the Protect Arizona Taxpayers Act was launched this spring, House Speaker J.D. Mesnard, a fiscal conservative, expressed surprise at it. However disdainful of taxes Arizona lawmakers may be, many probably would like flexibility on how to spread the pain – and not be handcuffed.
The last point is particularly important given the desire to boost funding of public schools. A number of folks chaff at the idea of raising the sales tax on goods another penny because that tax is already high and because it affects poorer people disproportionately. Others balk at the suggestion of increasing income taxes, including the much maligned Invest In Ed proposition.
Given all that, shouldn’t a tax on services remain on the table for consideration, too – and not enshrined in the state Constitution as a sacred cow?
As to Kwok’s last point, he should have added that initiatives enacted by the voters are protected by the Voter Protection Act, Prop 105 (1998), which “prohibits the governor’s veto; prohibits legislative repeal; [and] requires a three-fourths vote to amend measure, to supersede measure, or to transfer funds designated by the measure, and only if each furthers the purpose of the measure.” It would effectively be impossible to undo Prop. 126 if it passes.
In addition, the “Two-thirds For Taxes” Amendment, Prop. 108 (1992), i.e., the GOP’s weapon of mass destruction, requires a two-thirds vote of each legislative chamber to either enact a new tax or to reduce or eliminate existing tax exemptions or tax credits, which has had the effect of making permanent the annual tax cuts enacted by our GOP-controlled legislature since 1992, creating a structural revenue deficit in which vital public services like education are perpetually woefully underfunded based upon population and need when adjusted for inflation. It also has resulted in locking in an antiquated system of tax exemptions that the legislature has proven unable to reform despite years of talk about closing tax loopholes (exemptions).
Fiscal policy, i.e., tax and spend policy, is properly a legislative function for which a fiscally responsible legislature and governor is accountable to the voters. It is not a policy which should be superimposed in the Arizona Constitution to handcuff the legislature, and limit its options in reforming and modernizing Arizona’s badly outdated tax system to make it more fair and to produce sufficient revenue to meet the needs of a growing population. This is bad public policy. Stop being stupid.
Vote no on Prop. 126.