Governor Ducey Shows Disdain For Arizona Voters For Enacting Invest In Ed

I have corrected this Arizona Daily Star headline for accuracy. Ducey talks disdain for Arizona’s new education tax, vows fast fix:

A new voter-approved tax on high-earning Arizonans [Prop. 208, Invest In Ed] that will boost education spending is firmly in Gov. Doug Ducey’s crosshairs, with the Republican vowing Friday to see Proposition 208’s new tax canceled either through the courts or the GOP-controlled Legislature.

How dare the citizens of this state exercise their constitutional right to enact laws through citizens initiatives to pay for public education, something our GQP-controlled legislature has refused to do for years. “Don’t they know that the Arizona Chamber of Commerce and Industry and the “Kochtopus” (ALEC and the Goldwater Institute) own this state?”

Ducey told the Valley Partnership business group that he’s been advising people who ask him about the new 3.5% surcharge on the wealthy’s income to wait to take their investments to other states because the new tax won’t be collected until April 2022. Meanwhile, he’s working to make the measure dies, and he laid out his two-pronged strategy for doing just that.

Business groups and the GOP-led Legislature are challenging the new tax, and Ducey noted that the state Supreme Court has fast-tracked that effort by accepting the case before it can be fully heard by a trial court. Ducey filed a friend-of-the-court brief urging the court to act, and it will be heard on April 20. Ducey has appointed stacked the court with a majority of the justices (one of whom was the litigation chief for the Goldwater Institute).

If that effort fails, Ducey said he’s working with House and Senate leaders to come up with ways to neuter the new tax, which he said will make the state’s tax code uncompetitive.

“Prop. 208 promised additional dollars to K-12 education. I had no problem with that at all,” Ducey said. “But what it also did is took our top-tier tax rate from 4.5% to 8%. It was a 77% increase. That I have real issues with.”

This is misrepresenting what the tax actually does, and this shameless liar knows it. The surcharge only applies to high income earners. Truly “small” businesses are unaffected. They do not have profits in excess of $250,000. (Closely held corporations – LLCs and partnerships – earning a high income are generally organized as an S Corporation for tax purposes. S corporations do not pay any income taxes. Instead, the corporation’s income and losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns.)

There are multiple tracks the Legislature could take, but one that eliminates about a third of the estimated $827 million a year in new revenue has already passed the Senate. That measure, by GOP Sen. J.D. Mesnard, creates a new tax code section just for small businesses, setting the top tax rate at 4.5% but avoiding the new 3.5% surcharge.

When he’s not sponsoring legislation to suppress your vote, he is sponsoring legislation to reverse your vote, because Republicans are not bound by the will of the voters in a fair and free election. Authoritarian Republicans believe “we decide, and you shall obey!”

Arizona small-business income is currently taxed on personal tax returns. The new tax voters approved in November imposes a 3.5% tax surcharge on income above $250,000 for individuals or above $500,000 for couples. Opponents backed by the Arizona Chamber of Commerce and Industry spent millions trying to persuade voters it would hurt small businesses.

Proponents said the tax’s effect is on owners’ income, but Mesnard argued at a February committee hearing that setting up the new small-business tax is fair.

“I obviously during the campaigns heard consistently the surcharge is not aimed at small businesses, would not impact small businesses,” he told the Senate Finance Committee. “In many respects this just codifies that sentiment.”

Democratic Sen. Martin Quezada said at a full Senate debate that Mesnard’s plan was “a direct attack on the will of the voters.”

Damn straight it is! It shows contempt and disdain for the citizens of this state exercising their constitutional right to enact laws through their constitutional right to citizens initiatives to pay for public education, something our GQP-controlled legislature has refused to do for decades.

“This is another reason exactly why voters don’t trust us,” Quezada said. “They work their butts off to collect signatures, put a measure on the ballot that is going to fix a problem that we have failed to fix ourselves as legislators. They pass a proposition and we go and do something like this.”

Other paths to making the new tax less painful for the wealthy are contained in a state budget proposal now being negotiated where GOP lawmakers are considering a massive revamp of the tax code, at Ducey’s urging. His January budget proposal contains a $200 million per year tax cut that would rise to $600 million in three years. But with a budget “surplus” estimated to top $1 billion, Senate and House Republicans are looking way beyond that number.

Arizona does not actually have a “surplus,” because the legislature is simply refusing to fully restore funding levels to pre-Great Recession (2008) levels, some 12 years ago. This is tax dollars which should be used to restore funding to essential government services like education, not another corporate welfare subsidy and tax cuts for wealthy Republican campaign contributors. Republicans are the reason why we can’t have nice things.  See, ARIZONA’S UNRESTORED BUDGET CUTS:

Arizona made some of the steepest cuts in the nation, is one of only a handful of states still cutting today, even in a steadily improving economy.

Did you know our state has cut $4.56 billion dollars to public schools since 2009? And those cuts haven’t been restored.

Republican Rep. Ben Toma is leading efforts in the House to revamp the tax code. His proposal eliminates the current graduated tax brackets and replaces them with a flat 2.5% tax on all income levels. Under the current progressive tax structure, taxes start at 2.59% on the first $26,500 of income and rise to a maximum of 4.5% on income over $159,000.

A really BAD tax policy previously rejected several times even by our Republican controlled Arizona legislature. The GOP flat tax fantasy was pushed in 2009 by then-House Speaker Kirk Adams, who later served as chief of staff to Governor Ducey, and whose name is being floated as a potential candidate for governor in 2022. AZ GOP flat tax proposal will raise average Arizonan’s income taxes, It was floated again in 2011 by Rep.  Steve Court. Tea-Publicans believe in ‘flat tax’ fantasy. Luckily, the ‘Flat Tax’ pulled from a final vote – for now (both bills died). In 2011, former state Senator Paula Aboud (D-Tucson) organized “Ax The Flat Tax” Forums around the state that turned public opinion strongly against the flat tax. This public education campaign may now have to be revived.

The flat-tax proposal means the wealthy would see the biggest cuts. Toma said there’s also talk of capping the maximum tax with the Proposition 208 surcharge at 5% and using the general fund to make up the difference in the special fund created by the new initiative.

Half of the new tax on the wealthy will be used for raises for credentialed teachers, 25% to boosting wages for cafeteria workers, bus drivers and other support staffers, and the rest for teacher training, vocational education and other initiatives.

Even after Governor Ducey’s bogus Prop. 123 to steal money from the state’s education trust fund to give teachers a pay raise, as of February of this year Arizona teachers have the lowest wages in the nation, report finds, exposing the lie that Governor Ducey has done anything substantive to increase teacher pay.

The initiative was an outgrowth from a 2018 teachers strike that highlighted low wages for educators and a slow rebound from budget cuts enacted during the Great Recession. The walkout secured higher wages for teachers [Prop. 123], but many education interest groups said it fell short. A grassroots group then organized to pass the initiative.

Ducey said at Friday’s online meeting of Valley Partnership that he respects the initiative process and the will of the voters — he is a liar — then laid out his reasons for gutting the measure.

And he said he backs more cash for K-12 schools even as he is working to eliminate the new tax.

Saying you are for something but not doing anything to make it happen, and in fact, are actively working to make it not happen, just exposes the lie. Doug Ducey is a shameless liar.

“I think there’s a way to either ‘fix this’ [undermining Prop. 208] or in a way have the dollars available for K-12 education and keep our state competitive. One route is judicial, the other route is legislative,” he said. “And you should see resolution on this and clarity around this issue sometime in the coming months. But it will be this session.”

Before we hand out another corporate welfare subsidy and tax cuts for wealthy Republican campaign contributors, the Wall Street Journal reports how the wealthy are already evading paying taxes that they should be paying. High-Income Tax Avoidance Far Larger Than Thought, New Paper Estimates (excerpt):

The top sliver of high-income Americans dodge significantly more in income taxes than the Internal Revenue Service’s methods had previously assumed, according to forthcoming estimates from IRS researchers and academic economists.

Overall, the paper estimates that the top 1% of households fail to report about 21% of their income, with 6 percentage points of that due to sophisticated strategies that random audits don’t detect. For the top 0.1%, unreported income may be nearly twice as large as conventional IRS methodologies would suggest, the researchers wrote.

These strategies include offshore tax avoidance, which may have waned after stricter reporting requirements took effect about a decade ago. But many high-income Americans also use partnerships and similar entities to avoid taxes, and such behavior may be increasing and becoming harder for tax authorities to find and untangle, said Daniel Reck of the London School of Economics, the paper’s lead nongovernment author.

Such pass-through businesses [S Corporations]—where income passes directly onto their owners’ individual tax returns and isn’t taxed at the corporate level—are a large and increasingly important part of the wealth of the top 1%, particularly the top 0.1%. Investment funds, real-estate businesses and closely held family firms across industries are often structured as partnerships. Partnerships themselves are, of course, legal to use, but the IRS has struggled to find tax dodging inside webs of connected entities.

“There is more revenue than you might have thought at the very top,” Mr. Reck said. “What’s needed is a broader strategy that involves increased scrutiny of pass-through businesses [and] investments in the comprehensive audits that the IRS does in its global high-wealth program.”

The New York Times editorializes, How to Collect $1.4 Trillion in Unpaid Taxes (excerpt):

In a remarkable 2019 analysis, the Internal Revenue Service estimated that Americans report on their taxes less than half of all income that is not subject to some form of third-party verification like a W-2. Billions of dollars in business profits, rent and royalties are hidden from the government each year. By contrast, more than 95 percent of wage income is reported.

Unreported income is the single largest reason that unpaid federal income taxes may amount to more than $600 billion this year, and more than $7.5 trillion over the next decade. It is a truly staggering sum — more than half of the projected federal deficit over the same period.

The government has a basic obligation to enforce the law and to crack down on this epidemic of tax fraud. The failure to do so means that the burden of paying for public services falls more heavily on wage earners than on business owners, exacerbating economic inequality. The reality of widespread cheating also undermines the legitimacy of a tax system that still relies to a considerable extent on Americans’ good-faith participation.

Charles Rossotti, who led the I.R.S. from 1997 to 2002, makes a compelling argument that … Congress needs to change the rules, by creating a third-party verification system for business income, too.

The core of Mr. Rossotti’s clever proposal is to obtain that information from banks. Under his plan, the government would require banks to produce an annual account statement totaling inflows and outflows, like the 1099 tax forms that investment firms must provide to their clients.

Individuals would then have the opportunity to reconcile what Mr. Rossotti dubs their “1099New” forms with their reported income on their individual tax returns. One might, for example, assert that a particular deposit was a tax-exempt gift.

Mr. Rossotti has proposed that the I.R.S. require the new forms only for people with taxable income above a generous threshold. A bill including Mr. Rossotti’s plan, introduced by Representative Ro Khanna of California, sets that threshold at $400,000, to minimize the burden on small business. The money is undoubtedly in chasing wealthy tax cheats, but equity argues that business income, like wage income, should be subject to a uniform reporting standard. Small businesses ought to pay their taxes, too.

The proposal would not increase the amount anyone owes in taxes. It would, instead, increase the amount paid in taxes by those who are currently cheating.

It would have the immediate benefit of scaring people into probity.

You do not see Governor Ducey or Republicans in the Arizona legislature looking for ways to collect the taxes actually owed by tax cheating corporations and the wealthy, and using that tax revenue to make investments in essential government services like education.

Instead, year after year they make budget cuts to essential government services like education, lowering the baseline for funding, and instead of ever restoring the funding level they use a “surplus” on paper (revenues exceed spending) as an excuse for more corporate welfare subsidy and tax cuts for wealthy Republican campaign contributors. It is a transfer of the tax burden from corporations and the wealthy onto working Arizonans, who never receive the benefits of the taxes that they pay. It is theft from the working class to benefit the wealthy.