Gov. Doug Ducey is hoping to portray a voter referendum to quash the largest tax cut in Arizona history instead as bid to increase taxes.
The governor told Capitol Media Services on Thursday that a key to defeating the measure submitted for the 2022 ballot depends on how it is perceived. And that comes down to who gets to define the issue.
“Part of, I think, any campaign or election is how is the language presented,” Ducey said, “just like how a candidate is presented.”
The referendum is simple enough. It asks voters whether they want to ratify or reject the plan approved earlier this year by the Republican-controlled legislature to scrap the current state income tax system, with brackets and tax rates based on earnings, and replace it with a 2% flat tax, a rate lower than any that now exist. By definition, the people currently paying the highest tax rates — 4.5% — will get the biggest benefit.
Legislative budget staffers say the plan would cut state revenues by about $1.9 billion a year by 2025 when fully implemented.
But Ducey said the ballot measure need not be phrased as whether voters approve the lower tax rates.
“You could say, ‘Do you want to raise taxes across the board?’” the governor said. “That’s why the language is important before I give you my answer as to how we would conduct a campaign and what we would be advocating for.”
And Ducey, who supports the tax cut, has one thing on his side for how the issue is presented to voters.
By law, it is the legislative council that crafts the explanation of each ballot issue. And that panel is composed of lawmakers. More to the point, the majority of the council is composed of Republican legislators, all of whom voted for the tax cut.
But attorney Roopali Desai who represents the Invest in Arizona campaign that gathered the signatures to force a public vote on the plan, said any bid by lawmakers to craft the ballot explanation as somehow a vote on increasing taxes will get a fight.
Desai said that if the referendum succeeds and voters overturn what the legislature approved, all that would do is keep the tax rates at current levels. Put another way, no one would pay more than they do now.
“It is simply not the same to say that stopping a massive tax cut is the equivalent of raising taxes,” she told Capitol Media Services.
It is only if the referendum fails and voters ratify what the legislators approved that tax rates would change. And, in all circumstances, they would go down.
“I think that a first-grader can figure out the difference between addition and subtraction,” Desai said.
This isn’t the only way that the governor has sought to craft the debate in a manner designed to get public support. He has promoted the measure as providing a $300 annual tax cut for the average Arizonan.
But the Arizona Center for Economic Progress, working with data from the Institute on Taxation and Economic Policy, said that is far different than what most Arizonans will see.
It figures the average benefit for a household in the middle 20% of all income categories in Arizona — those earning between $40,000 and $64,000 a year — would be $47 a year. That figure would be roughly the median, with half of Arizona households getting more and half getting less.
In fact, those in the next highest income group, with taxable income of between $64,000 and $108,000, would be looking at reducing their tax liability by $174 annually. And that is still less than the governor’s $300 average.
It isn’t until you get above those numbers that the big breaks kick in. And those in the top 1% alone — bringing in $512,000 or more — would get an average break of $19,928.
Ducey clearly doesn’t like calculating the benefits for Arizonans that way.
“Maybe you want to talk averages instead of medians,” he said.
In promoting the referendum, backers argue that the state needs the money for other priorities including education. The most recent data from the Census Bureau puts per-student funding in Arizona at $8,625 a year, the third lowest of any state.
Potentially more significant, the same report says that Arizonans spend proportionally less than residents of almost any other state on K-12 education, putting the burden at $12.80 for every $1,000 of personal income. Only Florida comes in lower.
The governor says state funding figures are misleading because they do not include other sources, including local and federal dollars.
But the numbers appear to include what local taxpayers pay, with even the state’s own budget estimates putting state-only dollars at $6,612 per student this year. And Ducey did not explain any basis for believing federal aid is significantly different among the states.
The governor was undeterred.
“It’s this whole game that the media wants to play, continuing to drive the education investment number down,” he said. And Ducey said education funding has been increased by billions since he took office in 2015, including a 20% increase in average teacher salaries.
Ducey brushed aside that, even with all that, Arizona is far below the national average.
“Spending is not going to be the measurement of success for the state of Arizona,” he said. “It’s going to be improving in math, reading and science.”
He also said that test scores have increased.
“We’re getting more of a return for investment than other states,” Ducey said. And the governor denied that he was giving away needed dollars, citing the fact that the state is currently collecting more money than it has budgeted for various programs.
“I’m allowing hard-working Arizonans to keep the money they’ve earned,” he said.
Ducey’s comments come as Maricopa County Superior Court Judge Katherine Cooper is deciding whether voters will, in fact, get the last word.
Invest in Arizona submitted more than 215,000 signatures to put the tax cut on hold until the November 2022 election when it would be presented to voters.
The anti-tax Arizona Free Enterprise Club filed suit to block a public vote, contending the tax-cut measure is exempt from laws allowing a voter referendum because it affects state revenues. And if that argument fails, their attorney, Kory Langhofer, is prepared to argue that many of the signatures should be thrown out because of irregularities, potentially leaving the effort short of the 118,823 valid names necessary to force a public vote.
