Red4ED Is One of the Most Expensive Failures in Arizona Political History

Red4ED Is One of the Most Expensive Failures in Arizona Political History

Push a sympathetic message. Drum up a bunch of misguided support. And then aim for a ridiculous tax increase. That was the strategy from Red4ED after it launched a little over four years ago.

In that spring of 2018, the color red was popping up all over the place—from Facebook profile pictures to protests at the state Capitol. And it was supposedly all about increasing teacher salaries and funding for K-12 education. It was a movement that had great momentum, a sycophant media, and a political class that was terrified to stand up to them. Yet they figured out how to, in four short years, go from a political juggernaut to one of the largest and most expensive failures in Arizona political history.

Of course, defeating this multiyear assault on Arizona by Invest in Ed was a huge win for taxpayers, job creators, and the future prosperity of our state. And it would not have been possible without a combination of political miscalculations and blunders by the Red4ED decision makers and a consistent, sustained opposition from key organizations and elected officials willing to stand up to the bullies behind the movement.  

A Massive Legal Blunder

While the story of Red4ED began with a protest at the Capitol and demands for higher teacher pay, the movement was quickly hijacked by the teachers’ unions and other out-of-state special interest groups. It didn’t take long for the mission to morph from one about helping teachers into a singular quest to double the state income tax through a ballot initiative.

Soon after the first protests, a consortium of liberal organizations launched Invest in Ed version one, a poorly drafted initiative that proposed to double Arizona’s income tax. After receiving over $2 million from the National Teachers Union, Red4ED was successful in submitting enough signatures for their tax increase initiative to qualify for the 2018 ballot. But there was a problem. The organization’s 100-word summary of its ballot measure was grossly misleading. The Arizona Chamber of Commerce sued, and the Arizona Supreme Court ruled against it, saying that the description “did not accurately represent the increased tax burden on the affected classes of taxpayers.”

Whether it was an intentional effort to mislead the public or just a complete drafting blunder on their part, Red4ED’s tax increase initiative was removed from the ballot. And a $2 million lesson was learned. Or was it?

Their Litigation Woes Continue

Red4ED regrouped after its embarrassing court loss and put all its effort—along with more than $23 million—toward passing Invest in Ed version 2.0, also known as Prop 208. After an ugly campaign that involved deceiving voters once again, the initiative barely passed with 51% of the vote.

Yet just like the first initiative, Prop 208 was taken back to court, this time by the Arizona Free Enterprise Club and Goldwater Institute. And once again, the measure was struck down by the Arizona Supreme Court.

The court determined that the initiative violated the constitutional expenditure limitation. Here is the craziest part of the story—the drafters of the initiative knew that it violated the constitutional expenditure limitation. That’s right, the people that put Prop 208 on the ballot were fully aware that their measure had a constitutional defect. Yet their lawyers thought they could address the problem by including language that would “exempt” their statutory measure from the constitutional spending cap. As you would expect, this didn’t work, and the court struck down the measure in its entirety. But instead of cutting their losses and figuring out how to stop burning money that they said teachers desperately needed, Red4ED found a new way to target Arizona taxpayers.

A Futile Effort

In the midst of a brutal year for many, the Arizona legislature delivered historic tax cuts in June 2021. You would think this would be a cause for celebration for everyone, but Red4ED refused to join the party. Instead, the group spent over $5 million to hire an army of paid circulators to put a referendum on the ballot to block the tax cuts from going into effect.

They thought they finally scored a big win, but it turns out the only thing they scored was more legal headaches. Immediately after the referendum was submitted, the Arizona Free Enterprise Club filed a lawsuit, challenging the constitutionality of ballot referral. It was our belief that the measure did not comply with the “support and maintenance” clause in the constitution, and therefore the tax cuts were not referrable.

Nine months after our lawsuit was filed, the Arizona Supreme Court agreed with our position and ruled against the referendum, issuing a big win for taxpayers throughout the state.

If you’re doing the math, that’s more than $30 million spent in just over four years, and what does Red4ED have to show for it? Two legally flawed initiatives and a legally flawed referendum that all failed miserably. Plus, they took a movement that had sympathetic support for increased teacher salaries and turned it into a radical left/teacher union effort that destroyed any credibility they had with voters.

Adding insult to injury, they also had to endure watching the Arizona legislature and Governor Ducey implement the anti-Red4ED plan by slashing income tax rates in half to a flat 2.5%. In other words, a plan hatched by Invest in ED seeking to double the state income tax resulted in income tax rates that were slashed in half. What a disaster for them! But maybe they can at least celebrate the possibility that Red4ED may be the largest, most expensive failure in Arizona political history.

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Proposed Earned Income Tax Credit Is a Trojan Horse for Universal Basic Income

Proposed Earned Income Tax Credit Is a Trojan Horse for Universal Basic Income

Last year, the legislature passed historic tax cuts. The package was fair, lowering rates for all Arizonans across the board. Despite an effort funded with out of state millions to block the package and place it on the ballot, the cuts are in effect, and over the next two years our income tax will phase down to a single, flat rate of 2.5%.

That is what good tax policy looks like. Unfortunately, some legislators don’t want to be in the business of passing good tax policy. All too often they want to play the game of doling out taxpayer dollars to their special interest friends at the capitol, or to individuals in just straight welfare.

We have highlighted some of the bad tax credit programs being considered by lawmakers this year – hundreds of millions to woke Hollywood movie producers, millions to large corporations to fund liberal causes, both following millions doled out last year in corporate welfare.

In addition to these schemes, lawmakers are currently considering a measure, SB1018, to create a refundable “earned income” tax credit at the state level. Introduced by Democrat Senator Sean Bowie, it passed out of the Republican controlled Senate Finance Committee in January and passed out of the Senate in February by a vote of 22-6, with unanimous support from Democrats and a slim majority of Republicans.

This isn’t the first time we have seen the legislature try to set up an alternative universal basic income program in Arizona. Last year Sen. Bowie introduced SB1040, which also passed out of the Senate Finance Committee and out of the Senate by a vote of 26-3. Fortunately, it died in the House.

There has been an earned income tax credit at the federal level since 1975. It also provides refundable tax credits, meaning that instead of simply lowering the tax liability of individual taxpayers, those who have already zeroed out their liability get a check from the US Treasury. In 2015, 88% of those qualifying for earned income credits had zero tax liability and received a refund, amounting to $60 billion in spending.

The result is taking money from some taxpayers and giving it to others. Some call it redistribution of wealth, others guaranteed income. Both are correct, and if that sounds like something AOC and Elizabeth Warren would support, that’s because it is.

In fact, Kamala Harris boasted that their $1.9 Trillion American Rescue Plan “nearly tripled the earned income tax credit for workers.” Progressive think tanks have applauded the expansion, and argued for it to be a steppingstone to permanent guaranteed income. Some have even mapped out a plan to get there, calling it Universal Earned Income Tax Credits” – a fully refundable credit capped at $10,000 per individual, open to everyone.

Refundable tax credits or any other type of subsidy is terrible tax policy and is a bright line that should never be crossed. It is one thing to lower the tax liability of businesses or individuals. It’s another issue to just send out checks signed by every other taxpayer. Lawmakers should reject the universal basic income proposal that is SB1018, and instead build on the success of last session’s historic tax cuts that benefited all taxpayers, rather than just a select few corporations or individuals.

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Red4ED Is One of the Most Expensive Failures in Arizona Political History

A New Sales Tax for Fire Districts Is Unfair and Unnecessary

The last thing the people of Arizona need right now is a sales tax increase. But leave it to state lawmakers to try to push one through by proposing a referral to put a tax hike on the ballot to fund fire districts.

The bill is SCR1049. And if it makes it onto the ballot—and gets approved by voters—it would create a 20-year statewide 0.1% sales tax to fund Arizona’s 144 fire districts. It would also distribute the funds proportionally to the fire district’s equalized property valuation, but not to exceed 3% to any one fire district.

To the average voter, this may not sound like a big deal. After all, firefighters provide an important service that keep people and their property safe.

But this policy would be a disaster.

If enacted, all Arizona taxpayers would be forced to subsidize 1.5 million other Arizona taxpayers despite already paying taxes for fire and emergency services in their own communities. This is not only redistributive, but it’s unfair. And that’s not the only problem.

This policy is essentially a bailout for fire districts who have recklessly and wastefully spent taxpayer money. Having Arizona’s taxpayers indiscriminately subsidize districts that are not good stewards of taxpayer money is a perverse incentive. And it does nothing to require accountability. After all, these taxpayers have no say in the election of fire district board members. That means you will have no representation when it comes to how your money gets spent. Not to mention the fact that the proponents of the bill have not even tried to present a business case for why this new tax will help solve their underlying issues.

And what’s to stop them from coming back to taxpayers for MORE money? We see it time and time again when it comes to education. Do you think fire districts will act any differently?

The reality is that Arizona’s fire districts already have access to the property tax base, rates and charges for ambulance service, and Public Safety Personnel Retirement System benefits. These are two funding streams and a major benefit that the private sector cannot compete with. It’s bad enough that public fire has already spent years trying to push private providers out of the market. Giving them a third funding stream will only make it worse. This will create more funding buckets that will make it even more difficult to ensure transparency and a proper pulse on how much money these districts are taking in.

Most of all, if it gets passed, SCR1049 would set an awful precedent. Other taxing districts will assuredly look at this policy as a clever way to reduce accountability for spending all while increasing revenues by getting a piece of the sales tax base.

That’s why it’s imperative that the legislature votes NO on SCR1049 and retains its ability to direct tax policy and pass a balanced budget. As the Club has said throughout the year, now is not the time to raise taxes on the hard-working people of Arizona. With exorbitant gas prices and rising inflation, they need every break they can get. Lawmakers got it right last year when they delivered a historic tax cut. They need to follow that same principle this year.

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Biden’s Billionaire Minimum Income Tax Is a Dangerous Slippery Slope

Biden’s Billionaire Minimum Income Tax Is a Dangerous Slippery Slope

“Punish the rich” tax proposals never seem to go out of style—at least for the Democrats. In the 2020 Democratic presidential primaries, it was all the rage for Senators Elizabeth Warren and Bernie Sanders. But after they both failed in their White House bids, they decided to double down on their wealth tax with an ill-conceived proposal on Capitol Hill in early 2021.

So far nothing has come of that. But enter President Biden.

At the end of March, Biden unveiled his Billionaire Minimum Income Tax proposal, and it’s every bit the disaster that you would imagine it to be. The plan would tax the appreciation of financial and business assets worth more than $100 million. (That’s not exactly a billion in net worth, but math has never been a strength for the Democratic party.)

So, how would it work?

Biden’s proposal would require taxpayers who are worth more than $100 million to pay a minimum of 20% on their capital gains each year, whether they sold the assets for a profit or continue to hold them. This would put a tax on unrealized gains, completely overhauling the current tax code which only taxes gains after they are realized (e.g. when someone gains a profit from selling a stock).

The idea is quickly gaining ground with most Democrats who believe that it could create hundreds of billions of dollars in new revenue over a decade. Of course, that’s just a small drop in the bucket for Biden’s $5.8 trillion budget proposal, which means, guess what? They’re still going to come after your dollars, middle class.

But don’t tell that to Arizona State University law professor Erin Scharff. She’d rather peddle this garbage on behalf of the president and push Congress to make these $100-million billionaires “pay their fair share.”

Unfortunately, Ms. Scharff doesn’t understand that most wealthy people will still figure out ways to avoid paying the tax—even if it is implemented. And if they do end up paying it, the results would likely add more damage to our economy.

But if Ms. Scharff can’t wrap her head around that, you would think that as a law professor, she could at least recognize that Biden’s Billionaire Minimum Income Tax—much like many of his plans—is likely illegal. Other similar taxes that have targeted wealth have been reviewed in the past, and this one likely runs afoul of the “direct tax” clause in the U.S. Constitution.

It’s pathetic that an ASU law professor is pushing a tax plan that is on extremely shaky legal ground, but this is the state of “higher education” in America.

Regardless of its legality, there is no doubt that—just like the original income tax—this new billionaire tax plan won’t just be a tax on the rich. As history has shown us time and time again, the appetite for more revenue never subsides in Washington, D.C. You can guarantee that this plan will eventually apply to everyone—no matter your income or your wealth. And that just goes to show you how this proposal by Biden—and pushed by this law professor—is completely out of touch with the issues affecting taxpayers. Inflation is out of control and supply chains are still a wreck, but for Democrats and ivory tower law professors, those issues are secondary to their ideological desires to redistribute wealth.

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Prop 208 Is Dead but the Fight Against Red4ED Is Not Over Yet

Prop 208 Is Dead but the Fight Against Red4ED Is Not Over Yet

The State of Arizona has great reason to celebrate. In a case that the Club joined as a plaintiff, Maricopa County Superior Court Judge John Hannah ruled against Prop 208, determining that the money raised from the tax would exceed the constitutional spending limit for education. This decision followed the Arizona Supreme Court’s ruling last August that Prop 208 was unconstitutional. And now, it officially puts the nail in the coffin of the largest tax hike in Arizona history.

This is great news for taxpayers throughout our state, except if you’re House Democrat Minority Leader Reginald Bolding apparently. But while Prop 208 may be dead, the fight is not quite over yet.

For years, teachers’ unions and out-of-state special interest groups led by the National Education Association (NEA) and Stand for Children have been trying to push this $1 billion tax hike on the backs of Arizona’s small businesses. And they’ve spent over $40 million trying to make that happen. That’s right. Over $40 million with nothing to show for it.

But Red4Ed and the rest of the backers of Prop 208 won’t give up. After the Supreme Court struck down their unconstitutional tax hike, they moved to target the $1.8 billion tax cut that would establish a flat tax and provide a tax cut for all Arizonans. Back in October, Invest in Arizona, a political committee sponsored by the Arizona Education Association and Stand for Children, submitted a referendum to put the historic tax cuts on the ballot for voters to decide its fate. Thankfully, the Invest in Arizona ballot referendum to overturn SB1783, which was passed to give tax relief to small business owners in our state, failed signature review.

And while they want you to believe that the referendum was a “citizen led grassroots effort,” their campaign finance report tells us otherwise. The NEA and Stand for Children dumped in more than $4.5 million to flood the streets with paid circulators to gather signatures for the referendum. (That’s in addition to the $40 million we mentioned earlier). And when they realized that it was tough to get people to sign a referendum that would give them a tax cut, the circulators started lying to voters, telling prospective signers that the referendum would somehow stop K-12 funding cuts.

With Arizona sitting pretty with a $4 billion dollar surplus, it is absurd that these out-of-state special interests would be spending millions to block tax relief for Arizonans. But we also think their referendum is unconstitutional and lacks the requisite number of signatures to qualify for the ballot.

The bills being targeted by Invest in Arizona directly provide for the support and maintenance of our state. And the Arizona Constitution is clear that issues related to the support and maintenance of the state government cannot be referred to the ballot. It was also clear after our signature review of the referendum that over half their signatures were invalid or were gathered fraudulently by the circulator mercenaries that they hired.

That’s why the Club filed a lawsuit against Invest in Arizona’s tax cut referendums. While we’re still waiting for a decision from the Maricopa County Superior Court, there’s a good chance that this will wind up at the Arizona Supreme Court just like Prop 208. And let’s hope they rule the same way.

Arizona is already spending a record amount of money on K-12 education. And the tax cuts Republicans delivered back in July still allowed for hundreds of millions in new funding for K-12 schools and universities. Now, it’s time to ensure that the people of Arizona get what they really need: tax cuts that put more of their hard-earned money back into their pockets.

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Supreme Court Ruling Against Pinal County Transportation Tax Is a Big Win for Taxpayers

Supreme Court Ruling Against Pinal County Transportation Tax Is a Big Win for Taxpayers

We tried to warn them. But Pinal County officials decided to move forward with their illegal and unconstitutional transportation tax anyway. Thankfully, on Tuesday, the Arizona Supreme Court issued a tremendous victory for Pinal County taxpayers and the rule of law.

And while it’s disappointing that taxpayers were forced to pay thousands of dollars to defend this illegal tax scheme in court, the Pinal County Board of Supervisors will now have to end the collection of this tax and issue refunds to aggrieved taxpayers.

A tax on retail sales below $10,000

This all started in 2016 when Pinal County officials began turning the political wheels to send a $640 million tax increase to voters to fund a wide array of transportation projects throughout the region. But after unveiling the plan, the effort quickly spurred opposition from retailers, home builders, auto dealers, and multiple taxpayer watchdog groups.

You would think that county officials would have taken this as a sign that the community didn’t support their proposal. But no. Instead, they developed a new plan to try to buy off their political opponents.

In order to eliminate opposition to their scheme from certain businesses, county officials added a special carve-out for purchases that exceeded $10,000 from paying the new tax. Interesting move, isn’t it?

But this meant that the new tax would apply only to retail sales below $10,000—making the day-to-day purchases of lower-income citizens more heavily taxed than more expensive items.

It also meant pushing a tax scheme that likely violated state law. County officials were aware that capping the tax at $10,000 wasn’t authorized by statute, which is why Pinal County introduced HB2156, legislation that was quickly killed by lawmakers.

A violation of Arizona law

Arizona’s tax laws are already some of the most confusing in the country, and Pinal County’s transportation tax only made that worse. If counties could be allowed to create new tax classifications in addition to the ones already established under state law, Arizona’s tax laws would become even more confusing with different taxes at different rates.

This is not what state lawmakers intended. County officials cannot be allowed to make their own rules. After all, this is the sort of thinking that pushes businesses out of our state and keeps new businesses from springing up inside our state. That’s why the Goldwater Institute challenged the Pinal County transportation tax in court. And the Club supported the effort every step of the way. Even the Arizona Department of Revenue sided with taxpayers on this one!

But Pinal County still tried to claim that it could subdivide the tax in this way because the law allows counties to set a “variable rate” in a tax, and that it was setting the “rate” of some sales at zero. Thankfully, the Arizona Supreme Court saw right through that argument, explaining that “In this case, Pinal County’s two-tiered tax rate structure—which established a positive tax rate and a tax rate of zero percent—sets fixed tax rates that never vary and are never subject to change.”

This is a big win for taxpayers in Pinal County and across Arizona. In the midst of a worsening economy, rising inflation, and near-record gas prices, our government should be seeking every way possible to put more money back into the pockets of its citizens. And if other counties are considering similar schemes, now a clear message has been sent.

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Arizona needs to have a unified voice promoting economic freedom and prosperity, and the Free Enterprise Club is committed to making that happen. But we can’t do it alone. We need YOU!

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