A group of Small Business Owners have filed paperwork to oppose the recently filed ballot measure that would dramatically increase income taxes on small employers. The proposed “Invest in Education” initiative would impose a new income tax bracket of 9 percent, a near doubling of Arizona’s existing income tax rate. The new tax would give Arizona the 5th highest income tax in the nation.
“Doubling Arizona’s income tax rate would be devastating to small business owners and will drive many to either leave the state or go out of business,” said Ron Elwood, Chairman of the Small Business Owners Against I-17-2018 and owner of CFO for My Business. “It will directly impact our ability to expand, create jobs or make investments in the future. I’m not sure why the labor unions pushing this initiative decided to target small business owners in order to generate more tax revenue for schools.”
Jennifer Henricks, treasurer of Small Business Owners Against I-17-2018 and owner of Tees & More, believes the measure will divide our state rather than bring it together. “I don’t think anyone is against more funding for K-12, but increasing the tax burden on small businesses is the wrong way to do it.” Jennifer said. “Also, since the ballot measure only increased individual tax rates, small businesses will have to pay the new tax, but corporations won’t. How is that fair?”
Small Business Owners Against I-17-2018 will begin as a grassroots effort to educate voters on the damage the Invest in Education initiative will inflict on entrepreneurs, employers and Arizona’s economy. Some of the key issues that will be addressed in the campaign include:
- How doubling Arizona’s income tax will disproportionately affect Small Business Owners in Arizona
- Why Arizona will be at a competitive disadvantage if it has the 5th highest income tax in the country
- Why new investment and jobs will go to other states like Nevada or Texas if this initiative passes.
- How the measure will eventually lead to tax increases for all income taxpayers
“Our goal is to make sure voters are fully informed about the dangers of this initiative if it does reach the ballot,” said Ron Elwood. “We know that fighting this initiative will be an uphill battle, but we believe that the issue is too important to stay on the sidelines.”
When the City of Phoenix was considering the transit sales tax increase in 2015, hidden in the noise of the campaign was a proposed transit project to extend the light rail line along Central Ave. from Washington/Jefferson South to Baseline Rd.
Throughout the entire transportation planning process at City Hall, only scant details were provided to local residents and business owners on the impact the Central Ave. light rail line would have on the community. Only now is the truth coming out, and local residents are rightfully aghast at how destructive this project is going to be.
Among the most shocking discoveries was the fact that the proposed project would reduce Central Ave. from 4 lanes to 2, a drastic change that will increase traffic congestion and inflict immeasurable economic damage to neighboring businesses. Additionally, the elimination of multiple left turn lanes will make access to many shops nearly impossible along the route.
If the specter of an unnavigable two-lane road isn’t scary enough, the reality is that many of these shops won’t survive the construction phase of the project—4 years of aggravating roadwork that will send customers fleeing and crushing their bottom line.
The false claims of community support were just as disturbing. For months, Phoenix circulated materials claiming enthusiastic support from businesses along Central Ave. One small problem: many of the allegedly supportive business owners either were unaware of the light rail project or opposed it altogether. Larry White of Lolo’s Chicken and Waffles and Pastor James Preston of Preston Funeral Homes and Bethesda Community Baptist Church had to submit written letters expressing their disapproval of light rail after discovering that they were listed as supporters of the plan.
In response to Phoenix’s deceptive rail campaign, a citizen led effort called “4 Lanes, or No Train” organized to try and stop the current proposal in its tracks. Their goal is to educate the South Mountain Village community on the detrimental impacts of the current proposal and offer common-sense alternatives.
Their demands are reasonable: maintain 4 street lanes for cars along Central Ave, expedite construction, explore alternative transit solutions that cost less than light rail, and oppose any confiscation of private businesses and private property from the citizens.
The community response to ‘4 Lanes or No Train’ has been tremendous. After learning more about the high costs ($140 Million per lane mile for light rail), increased congestion and inevitable closure of many local small businesses, over 3,000 residents have signed their petition. Group organizer and owner of a window tinting shop, Celia Contreras, fears that her business will be one of the casualties.
So far Phoenix has ignored the community outcry, but the pressure is mounting. A community meeting has been scheduled for May 31st at the South Mountain Community Center to discuss the project, and it is likely to become a campaign issue in the Phoenix Council Elections.
The outstanding question is how will this particular story end? Defeating the light rail lobby is an uphill climb, as they are well funded, politically powerful and sinister in their tactics. Our hope is Celia Contreras and her community allies are successful in derailing the light rail scam.
Looking to exploit the momentum created by the recent school strike, a small coalition of liberal organizations and labor unions have launched a ballot initiative that would permanently damage Arizona’s economy.
The proposed “Invest in Education” proposition would impose a new top individual income tax bracket of 9 percent, a near doubling of the current top rate of 4.54 percent. This radical increase would give Arizona the 5th highest income tax rate in the nation, trailing only California, Hawaii, Oregon and Minnesota.
Joining the ranks of the high-income tax states would be a decision that Arizona would quickly come to regret. The evidence is overwhelming—states with a low or no income tax have consistently outperformed high tax states in job creation and economic growth.
It is why for decades Americans have been voting with their feet and moving to states like Arizona with a favorable tax climate. On net, nearly 1,000 people a day are migrating to low income tax states, while the same number is exiting high tax states. If this initiative passes, we should expect entrepreneurs, high earners and employers to take their jobs and investments elsewhere.
To justify their crushing tax hike, proponents are promising that the approximately $700 million in anticipated new revenue from the tax will go toward K-12 funding. Of course, the initiative doesn’t include any language that ensures the money will make it into the classroom, nor does it include any reforms to improve outcomes or parental satisfaction.
They are also selling their plan on the idea that only the “rich” will pay the tax increase. In reality, small business owners and entrepreneurs will be hammered by the increase since they pay their taxes through the individual tax code.
Also unmentioned by the proponents of the initiative is that a new revenue stream for schools is no longer needed. While the Red for Ed debate was raging on at the legislature and in living rooms this spring, economic forecasts confirmed that Arizona would have the largest budget surplus since the great recession.
This tremendous news is not an accident. The rapid acceleration of projected revenue is a direct result of both local and national policies that fostered a pro-growth economic environment in Arizona. It can be argued that lawmakers reacted too slowly during the legislative session to allocate new funding into K-12 classrooms (close to $1 billion), but it illustrated that the best mechanism to generate more money for schools is through economic growth, not job crushing tax increases.
The impact of the largest tax increase in Arizona history would be catastrophic. It will kill jobs, punish small business owners and send families fleeing to other states. The proponents of this measure might think they are being clever by linking two politically attractive targets—school funding and taxing the “rich”—but we are confident that voters will see through their ploy and reject this divisive initiative if it reaches the ballot.
Last Thursday 50,000 individuals descended on the Arizona Capitol in support of a teacher’s strike; the state’s school districts shut down and turned away roughly 800,000 students.
According to the narrative surrounding Arizona’s education system, nearly everyone is willing to accept that teachers are grossly underpaid, that Arizona ranks 50th in per pupil funding and that the state has failed to backfill $1 Billion in pre-recession education funding. Indeed, according to the machine that consistently ensures Arizona gets no credit for educational wins and disparages our system at every turn, Arizona ranks dead last in every possible educational metric.
But there is more to the story. And if Arizona is going to take meaningful steps to improve the K-12 system, we must first start with a clear and factual picture.
Last year the Morrison Institute at Arizona State University published a study declaring a startling decline in teacher pay and turnover. Their work joined the collection of analyses of teacher pay done by the National Education Association (NEA), the Arizona Office of Auditor General (OAG), and National Center for Education Statistics (NCES.)
According to the Morrison Institute, the 2016 average salary of an Arizona elementary school teacher adjusted for “regional buying power” was $40,860 and $46,070 for secondary teachers – 50th and 49th in the country, respectively.
This was a curious finding, especially since most every other national ranking has Arizona with a higher average teacher salary than the Morrison Institute. The National Education Association ranks Arizona 43rd in the country at an average teacher salary of $47,218. The Arizona Office of the Auditor General has Arizona teacher salaries at $46,384 and the National Center for Education Statistics has Arizona ranking 44th in the country with average teacher salaries at $47,403.
How could the Morrison Institute arrive at such a different conclusion than virtually every other study on teacher pay? The answer appears to be that they decided to use a combination of questionable wage and cost of living data to show Arizona in the worst light possible.
For example, in calculating the wage figures, the Morrison Institute used the Bureau of Labor Statistics (BLS), a data set that only uses a cross-section of W-2s and leaves out other wage information such as teacher bonuses. No other major study (including the NCES) use BLS wage data, and the result is a significantly lower average teacher pay figure.
The Morrison Institute skewed the numbers even further when adjusting for cost of living. In comparing wages among states, most studies incorporate the Cost of Living Index (COLI) to adjust for salaries. The Morrison Institute instead used the Regional Price Parities index, arguably one of the more questionable data sets available. For example, RPP doesn’t take into account the average cost of home purchases, which would lead to a large discrepancy since Arizona is one of the more affordable states to own a home.
When COLI is used to analyze the more comprehensive NCES and NEA data – Arizona is 40th in the country and outranks Colorado ($46,506), Utah ($47,244) and New Mexico ($47,403) in the region.
How would Governor Ducey’s 20by20 plan impact Arizona’s national standing for teacher pay? A 20 percent raise would increase the average teacher salary in Arizona to $56,661, a $9,443 dollar increase. Adjusted for cost of living, Arizona would vault to 10th in the country for teacher pay.
These facts should be empowering and encouraging to Arizona taxpayers who are used to hearing a constant onslaught of criticisms about how despondent the prospects of our public education. Considerable and noticeable improvements are achievable and can be accomplished without raising taxes.