by admin | Jun 25, 2022 | News and Updates, Tax
State taxpayers should not be bailing out a broken Maricopa Association of Governments (MAG) plan. But that’s exactly what lawmakers are doing in the recently enacted Arizona state budget. That’s right. Your elected leaders just passed a budget that includes hundreds of millions of dollars for road projects—all being paid for with your tax dollars. (You can see for yourself on pages 9-11 right here.)
At first glance, that probably doesn’t seem like a big deal. After all, it makes sense for tax dollars to go toward necessary road projects. But the problem is that these road projects are supposed to be paid for by the Maricopa County Prop 400 regional plan that was assembled by MAG.
In 1985, Maricopa County approved a 20-year transportation tax increase that was designated exclusively to build new roads and freeways in the region. And the plan was actually successful because it built that essential infrastructure. But over the decades, the plan shifted from roads and freeways to “transit,” despite a steep, increasing decline in its use.
In 2004, the tax was extended for the first time as Proposition 400 and began to migrate away from its purpose. It created three funding buckets: 33.3% for transit (with 14% earmarked for light rail), 56.2% for freeways and highways, and 10.5% for arterial streets and intersections. But now, MAG has proposed a new “Momentum” plan to extend Prop 400 that is being debated again. And it’s such a gross departure from the original purpose of the tax that it cannot seriously be called a regional transportation plan.
HB2685/SB1356 spends very little on freeways, and instead diverts most of the money to light rail, street trollies, bike paths, trails, complete streets, and a “regional program” slush fund that will result in increased traffic congestion.
In short, we are now considering a tax that’s supposed to be used for freeways and roadways that is no longer going toward freeways and roadways! That’s exactly why lawmakers slipped those line items into this year’s Arizona state budget. Prop 400 wastes billions of dollars on Green New Deal transit projects, so taxpayers throughout the state are forced to subsidize infrastructure projects in the budget for Maricopa County! What a joke.
This is nothing more than a $70 billion boondoggle for cities and towns. And it will likely lead to even more future tax hikes. If you’re not mad yet (which is hard to imagine at this point), maybe you will be when you’re stuck in even more traffic on a 110-degree June day watching an empty light rail zooming past your car. Because with such low ridership, light rails and street cars are known for only making traffic congestion worse. And MAG expects as much by 2050 despite this $70 billion in planned spending.
But today, your lawmakers don’t care about that. Instead, they’re having a jolly good time patting themselves on the back for their new budget. Of course, what they probably don’t realize, is that they simply proved that MAG’s proposed “Momentum” plan is a complete failure.
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by admin | Jun 7, 2022 | News and Updates, Tax
With Bidenflation guzzling through the pockets of all Americans, especially at the gas station, we have heard more and more politicians promoting the idea of a gas tax holiday. Regardless of how popular the idea has become or how good it sounds among Republicans and Democrats alike, it’s still nothing more than a gimmick and talking point for campaigns.
A tax holiday isn’t a new idea. Several states have permanent sales tax holidays, commonly occurring for a week or two each year around the time kids return to school and parents are busy shopping for clothes and classroom items. But these permanent recurring tax holidays don’t accomplish what they seek to accomplish. Instead, they complicate the tax code, create instability, and mislead consumers about savings.
As a temporary response to rising gas prices and increasing inflation, it’s even worse. The reality is that permanent, long-term policy decisions are driving up fuel costs. These destructive ideas are a big part of the Green New Deal platform that has been pushed by the environmental left for decades. Add on an increase in demand, historic inflation from out-of-control federal spending, and no longer being an energy independent net-exporter of oil, it’s no wonder gas prices are higher than anyone can remember.
Suspending the gas tax is a gimmicky talking point to make it look like politicians are doing something. Instead, they are simply distracting voters and taxpayers—without any real, long-term benefit to them—and painting over support for an anti-energy agenda. That’s why we see Arizona Senator Mark Kelly coming out and supporting a gas tax holiday at the national level.
Temporarily suspending an 18 cents per gallon tax for a few months will provide little relief at the pump. If anything, it will only cause a cost shift and be used for campaign talking points. A permanent reduction in the tax may provide more long-term certainty and lower prices but would be limited in impact given that the state gas tax currently makes up around 3% of the current price per gallon.
Additionally, Arizona’s gas tax is constitutionally required to fund highway and street projects, so when the revenue drops to zero, funds from other sources will be tapped to fill in the gap. This will place pressure on politicians to consider tax shifts—raising taxes elsewhere to fund the revenue reduction from the tax holiday.
Nevertheless, some Arizona lawmakers may be tempted to promote a temporary gas tax holiday in exchange for other permanent spending and other gimmicks in the budget. After all, it’s June, and the legislature still has not figured out how to corral the necessary votes on a budget deal before we hit the end of the fiscal year on June 30th.
Simply put, a temporary tax holiday should not be traded for other bad policies, like permanent spending or tax shifts. Conservatives should push for real, permanent tax relief and reform, and let the gamesmanship stay in DC.
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by admin | May 17, 2022 | News and Updates, Tax
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.
Help Protect Freedom in Arizona by Joining Our Grassroots Network
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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by admin | May 10, 2022 | News and Updates, Tax
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.
Help Protect Freedom in Arizona by Joining Our Grassroots Network
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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by admin | Apr 21, 2022 | News and Updates, Tax
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.
Help Protect Freedom in Arizona by Joining Our Grassroots Network
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!
Join our FREE Grassroots Action List to stay up to date on the latest battles against big government and how YOU can help influence crucial bills at the Arizona State Legislature.
by admin | Apr 7, 2022 | News and Updates, Tax
“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.
Help Protect Freedom in Arizona by Joining Our Grassroots Network
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!
Join our FREE Grassroots Action List to stay up to date on the latest battles against big government and how YOU can help influence crucial bills at the Arizona State Legislature.
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