The so-called Citizens for Fair Tax Policy Committee (it is actually the Arizona Association of Realtors) is already running television ads for Prop. 126, a constitutional amendment titled the Protect Arizona Taxpayers Act.
You have to go to their website to see a copy of this false and purposefully misleading ad designed to dupe the public. https://protectaztaxpayers.com.
This is a special interest initiative, not a true citizens initiative. And it is yet another example of an anti-tax ballot measure of the type that has gotten Arizona into the revenue deficit problem we have today.
It is a preemptive measure which is a solution in search of a non-existent problem — services are not subject to sales tax in Arizona — and likely will never be because of Prop. 108 (1992) the “Two-Thirds for Taxes Amendment,” the GOP’s weapon of mass destruction which requires a two-thirds vote of each legislative chamber either to impose a new tax, or to eliminate or reduce a tax credit or tax exemption.
The legislature’s renewal of the school sales tax this past session to avoid sending it to the ballot for renewal was the first time since Prop. 108 passed in 1992 that the legislature has voted in favor of a new tax.
Annual attempts to clean up Arizona’s antiquated tax exemptions have been snuffed out by the special interests that benefit from them. There is no real threat of services being taxed.
A constitutional amendment to address a non-existent problem is the height of bad public policy.
Most states do not charge sales taxes on services. Only Hawaii, New Mexico, and South Dakota charge sales taxes on all services provided by businesses to their customers. Other states have only taxed certain types of services.
As Pew reported last year, Why States Are Struggling to Tax Services:
Twenty-three state legislatures considered proposals this year to impose taxes on at least some services. But so far, none has made it into law intact — and most died outright.
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Trying to define exactly what services should be subject to a new tax can be tricky, with proposals to tax specific businesses usually drawing opposition from those who would be affected. And proposals to tax all services prompt demands for exceptions from businesses that maintain they are “essential” and should not be subject to tax.
Another challenge is that taxes on services are regressive, with a disproportionate impact on low-income residents, and are sometimes seen as an unfair way to plug a budget hole or reduce other taxes, prompting opposition from advocates for the poor.
But this is what the special interest Arizona Association of Realtors is worried about:
[Conservative Republican] Oklahoma Governor Mary Fallin called for a “sales tax modernization” in her budget message this year. “As the economy in the United States has shifted from a manufacturing based economy to a service based economy, the way we impose taxes and collect revenue no longer reflects the current economy, but an outdated system that has not changed much since its inception,” she said.
Gov. Fallin is insightful and correct. This is why state legislatures need flexibility in fiscal policy, not restrictions imposed by special interests to tie their hands as Arizona has done far too many times over the years.
Fallin initially proposed expanding the state’s 4.5 percent sales tax to broadly cover services, with the goal of raising an additional $839.7 million annually. Partly because of a decline in oil revenue, Oklahoma faced a nearly $900 million shortfall in its $7.8 billion budget. As a tradeoff, the Republican governor proposed removing groceries from the items subject to the sales tax along with lowering corporate taxes.
She was not specific on the services to be taxed, but a report from the progressive Oklahoma Policy Institute suggested that they could include activities like home repair, auto services and washing, service contracts, funeral services, cable television service and overnight trailer park rentals.
But the outline immediately ran into trouble both from anti-tax legislators who predominate in the conservative state, and service industries that could have been affected. The funeral home industry called the proposal a “death tax” and argued that families already burdened with thousands of dollars of funeral expenses didn’t need a sales tax bill on top.
This is exactly what would happen in Arizona to any legislative proposal to impose a sales tax on services. Special interests and anti-tax zealots dominate the Arizona legislature. Therefore, there is no reason for The Protect Arizona Taxpayers Act, and it should be rejected by voters.
The problem is that the Arizona Association of Realtors is likely to be able to dominate the airwaves with their false and purposefully misleading ad designed to dupe the public.
As far as I can find at the Secretary of State’s website, there does not appear to be any committee organized to oppose Prop. 126. The “Against Arguments at the Secretary of State’s website include gubernatorial candidate Steve Farley (who has tried to close “tax loopholes” his entire political career), the think tank Grand Canyon Institute, and oddly enough, the “Kochtopus” organization Americans for Prosperity.
This “Kochtopus” organization is the only one that conceivably could invest the financial resources in an opposition to Prop. 126, or not. Other groups, especially good government organizations, need to step up to fill this void to fight for “No on Prop. 126.” As I said, a constitutional amendment to address a non-existent problem is the height of bad public policy.
I can’t be the only one sounding the alarm about this entirely unnecessary special interest proposition. Every Democratic candidate for office needs to make “No on Prop. 126” an essential part of his or her campaign. Arizona’s political media needs to start paying attention to this and arguing for “No on Prop. 126.” Each of you can write letters to the editor of your local newspaper.
Defeat Prop.126 this year, then file a citizens initiative to repeal Prop. 108 (1992), the “Two-thirds for Taxes” Amendment, so that we can restore fiscal sanity and fiscal flexibility to the Arizona legislature if we are ever going to have true tax reform and modernize Arizona’s antiquated tax structure to meet the fiscal needs of this state, and make our tax system genuinely more “fair.”