Income Tax Initiative Would Impose 4th Highest Small Business Tax Rate in Nation

by admin | Aug 6, 2018 | News and Updates, Tax

It seems every day more information emerges about the devastating impact the Washington DC financed ‘Invest in Ed’ initiative would have on Arizona taxpayers and small business owners.

Recently it was revealed that the proposed measure would repeal the automatic indexing of Arizona’s tax brackets – triggering a permanent and ever-growing tax increase on low and middle-income people and families.  This tax hike contradicts months of promises by the supporters of the measure that it would only raise taxes on the “rich.”

Now it has been confirmed that Arizona would have the 4^th Highest Small Business Tax Rate in the Country if this initiative is passed in November.

Jared Walczack, Senior Policy analyst at the Tax Foundation, confirmed to the Arizona Free Enterprise Club that a near doubling of Arizona’s income tax would vault Arizona to 4^th highest small business tax rate in the nation. “In most states, as with Arizona, the tax on pass-through income is just the personal income tax. If Arizona jumped to nine percent, it would now be fourth (in the country), behind California, Oregon and Minnesota for the highest rate.”

Arizona currently has the 38^th highest small business tax in the country, a ranking that makes our state attractive to entrepreneurs and small business owners.

Recent changes made by federal tax reform will only magnify the tax hit. Under the Tax Cuts and Jobs Act passed in 2017, the State and Local Tax Deduction was capped, limiting how much a small business may deduct in Arizona income taxes. “Given the recent cap placed on the SALT deduction, the tax cost of such high rates (on small businesses) is higher than ever.” Walczack said.

Exacerbating the tax hit is the fact that the new higher tax rates would not apply to corporations. Publicly traded companies and Fortune 500 businesses will be taxed at half the rate (4.9%) than most small businesses, an unfair advantage that will grow over time.

Arizona taxpayers should reject this radical upheaval of our income tax system, and preserve the attractive tax climate in our state for small businesses.

Income Tax Initiative Includes Large Tax Increase on Low and Middle-Income Families

by admin | Aug 2, 2018 | News and Updates, Tax

Since the proposition to double Arizona’s income tax was unveiled in early May, proponents of the measure emphatically promised voters that the only people affected by the tax increase was the “rich.”

That promise has already expired. Last month after filing 270,000 signatures with the Secretary of State, it was revealed that the “Invest in Ed” initiative would eliminate the inflation indexing of our income tax brackets and reset every tax bracket to 2014 levels.  The primary purpose for indexing the income tax brackets for inflation was to shield low and middle-income taxpayers from the cost of living inflation tax that occurs over time.

The irreversible elimination of inflation indexing would result in everyone’s income taxes going up in Arizona – to the tune of $49 Million in the first year, a figure that will grow exponentially over time.

Even worse, there is no real opportunity to fix this problem.  If this measure is passed, the proposition would be voter protected, meaning that it cannot be changed by the legislature. Even if a ¾ majority vote of the legislature agreed to bring back inflation indexing, it would still be illegal since lowering taxes would not further the intent of the proposal.

As more analysis is being done on this initiative to make Arizona the 5^th highest income tax state in the country, the clearer it has become that the Washington DC Labor Unions that financed this measure cared little about making sure that all of their claims were even accurate.

But as the saying goes, “the devil is in the details,” and the proposed largest tax increase in our state’s history has a lot of hidden, unexpected, and negative consequences for the future of Arizona.

Small Business Owner Files Suit Against Major Tax Hike Initiative

by admin | Jul 27, 2018 | News and Updates, Tax

An East Valley small business owner has filed suit against the initiative that would give Arizona one of the highest small business tax rates in the United States after the proponents filed enough signatures to qualify for November’s ballot.

The suit challenges the proponent’s deceptive and misleading claims on the impact the initiative would have on Arizona taxpayers and small businesses. Specifically, the backers of the measure omitted the fact that the initiative would eliminate the annual indexing of Arizona’s income tax brackets for inflation, a radical change that will cost Arizona taxpayers millions.

The measure also hid the size of the tax increase from voters. Supporters of the income tax increase claimed that the initiative would increase tax rates by only 4.46 percent, when in fact small businesses would be hit with a tax hike ranging from 76.2% to 98.2%.

“Like most other small businesses, we pay our business taxes as individuals. If our tax liabilities were to double as a result of this initiative, I don’t know how we will be able to survive.” Said Jennifer Henricks, a small family business in the East Valley and parent of three children in Arizona’s public school system. “It’s unfortunate that whoever wrote this initiative decided to mislead the public about the size of the tax increase.”

Henricks is the Treasurer for the “AZ SMALL BUSINESSES AGAINST I-17-2018,” a grassroots committee formed to educate citizens on the harmful impacts the initiative would have on small businesses throughout Arizona.

Also hidden from voters is how the proposed tax income tax increase will hammer small businesses while corporations are left untouched by the tax hike. “It is completely unfair that we will see our tax rates nearly double while Fortune 500 companies will get a special rate under 5%. If the goal was to punish small business owners while rewarding big corporations, this tax increase is the way to do it.” Henricks added.