Invest in Arizona campaign to overturn tax cuts with voter referendums not dampened by lawsuit

‘We went through it all with Prop. 208 and we are going to do it again.’

By: - July 25, 2021 11:00 am
TaiAnna Yee signs a petition

TaiAnna Yee (left) signs one of the three petitions that the Invest in Arizona campaign is gathering signatures for to overturn three laws Republican legislators passed to cut taxes and revenue for a voter-approved education fund on Saturday, July 14 in Tempe. The Invest in Arizona campaign must gather over 110,000 signatures by the end of September. They are facing a lawsuit to end the campaign on state constitutional grounds. Photo by Laura Gómez | Arizona Mirror

The Invest in Arizona campaign seeking to overturn three laws Republican legislators and Gov. Doug Ducey celebrated as “the single largest tax cut in Arizona history” marked its first week of action this weekend and garnered momentum around the state to get three referendums on the ballot in 2022. 

On a cloudy and rainy Saturday morning outside the Changing Hands Bookstore in Tempe, voters walked up to a folding table where Save Our Schools had set up to gather signatures for Invest in Arizona. 

“I believe in public schools and I believe public schools should be funded,” said TaiAnna Yee, who lives in Mesa. She read a news article about the campaign and looked on Twitter to find where she could go to add her signature to the petitions aimed at getting the three measures on the ballot. “It’s really important because we had passed it [ Proposition 208] back in November, and what the voters wanted is being undermined.”

What Ducey and Republican lawmakers are calling a tax relief for all state residents is largely designed to blunt the effect on wealthy Arizonans of Proposition 208, known as the Invest in Education Act. The measure imposes a 3.5% surcharge on income greater than $250,000 for individuals and $500,000 for couples, with the money directed to public schools to increase teacher pay and boost overall funding.

People with an income above $1 million — about 9,000 filers out of about 3 million tax returns — were projected to pay 40% more in taxes under Prop. 208, and the measure was projected to raise $970 million annually. The tax cut package, which among other things caps the tax rate at 4.5% for individuals with incomes greater than $250,000 ($500,000 for joint filers) would reduce that by between $263 million and $378 million every year, legislative budget analysts concluded.

While Ducey celebrated the passage of the tax cuts, groups like Save Our Schools, Stand for Children, the Arizona Education Association and Children’s Action Alliance readied the citizen referral measures to block the tax cuts and instead ask voters to approve or turn down the policies, which critics say are a massive giveaway to the rich and an affront to voter-approved Prop. 208.

Under the new tax laws Arizonans making more than $5 million annually would see an estimated tax cut of more than $350,000, while those making between $1 million and $5 million would save nearly $47,000 on average, according to nonpartisan legislative analysts.

Meanwhile, Arizonans making between $50,000 and $75,000 — the median household income is about $62,000 a year — would see their taxes cut by $96.

A flyer from the Invest in Arizona campaign
A flyer from Civic Engagement Beyond Voting for the Invest in Arizona campaign explains the “flat tax,” “tax cap” and “tax dodge” laws that it’s seeking to overturn after Republican legislators passed policies to cut taxes and revenue for a voter-approved education fund. Photo by Laura Gómez | Arizona Mirror

The Invest in Arizona campaign is challenging three laws and has to gather at least 118,823 valid signatures by the end of September. If the groups succeed in collecting the signatures they need to block each law, the new tax policies won’t go into effect without voter approval.

“We knew that Prop. 208 was going to be attacked,” said Rachel Clawson, a parent and former public school teacher who now works as an East Valley organizer for Save Our Schools. “It feels like a very critical time. We are getting to the point where it feels ridiculous. This legislature doesn’t care about public schools. We’re referring these bills (to the ballot). We have no other choice.

Clawson spoke outside the Tempe bookstore. Next to her, Julie Coheley, also a former teacher, asked families walking into the bookstore and a mother taking tutu-wearing girls to a dance class in the shopping center if they were registered to vote in Maricopa County.

“I’m tired of people always looking at (Prop. 208) as a money grab, as opposed to an investment,” she said. “As a former teacher, I used to spend my money to get books in the classroom because the district didn’t have the money. When you put money in education, the state will grow.” 

Lawsuit: New tax laws immune from citizen’s referral under state Constitution

But a lawsuit filed by the Arizona Free Enterprise Club shortly after Invest in Arizona launched seeks to render Coheley’s and the campaign’s time and efforts futile. 

The conservative group and its president and executive director, Scot Mussi, who was among the supporters of the tax legislation, filed a lawsuit on July 21 against the Invest in Arizona campaign and Secretary of State Katie Hobbs. The lawsuit seeks to prohibit Hobbs from accepting any petitions or certifying the petitions for ballot referral and declaring that the new tax laws are exempt from the ballot referral process under Arizona’s Constitution. 

Mussi, his group, and Diane Schafer, a Yavapai County resident, argue the tax laws Invest in Arizona wants to overturn are immune from the ballot referral process because they are “for the support and maintenance of departments of state government and state institutions.” That is generally interpreted to mean that appropriation measures cannot be challenged by the citizen referendum process. 

The lawsuit uses case law related to 1992 litigation where citizens tried to stop the Greenlee County Board of Supervisors from enacting a sales tax through a ballot referendum process. The referendum was denied because the sales tax was deemed necessary to meet the county’s annual budget, and stopping it would’ve affected the operation of government. 

The new tax cuts challenged by Invest in Arizona do the opposite of what Mussi and the other plaintiffs are arguing in the lawsuit, said Rebecca Gau, director of Stand for Children.  

“The case they are citing was about referring bills that were tax increases with a very narrow ruling,” Gau said in an email to Arizona Mirror. “Our referenda is the total opposite and is preventing a shortfall in the state budget. There is no prohibition from referenda on tax cuts in the constitution. They’re basically trying to fit a square peg into a round hole.”

Gau, in a Friday press release, also called the lawsuit frivolous and “yet another cynical attack on Arizona voters.”

“These are the same underhanded tactics they’ve been trying to use since 1.7 million voters passed Prop 208 in November 2020,” she said. “Their legal arguments are farfetched, unfounded, and untested, merely for the purpose of eroding the rights of Arizona citizens and voters.”

The laws Invest in Arizona is seeking to block

There are three laws being challenged:

  • Senate Bill 1827, which caps the tax rate at 4.5% for those with incomes greater than $250,000 for individuals or $500,000 for joint filers;
  • Senate Bill 1828, which creates a single 2.5% rate as soon as 2023 if state revenues hit certain triggers;
  • Senate Bill 1783, which creates a new business individual income tax with a 4.5% flax rate that some taxpayers can opt into — and any taxpayers who do so would be exempt from the Prop. 208 surcharge.

Helping or hurting schools?

Sen. J.D. Mesnard, R-Chandler, who is one of the main architects of the tax cut package, argues that the measures will actually help the state’s schools.

“Not a single dollar of Prop. 208 is impacted by this bill, not one,” Mesnard said on June 22 when voting to pass one of his bills. “All we’ve done … is make sure that we are not going to drive taxpayers out of the state and actually create a situation where you have less revenue going to our education system because less people are living here.”

The budget, which the Senate passed late into the night, could cost the state up to $1.9 billion if fully phased in by fiscal year 2025.

Craig Foster, a high school teacher in Scottsdale, said he “does not believe” arguments like Mesnard’s “at all.”

“The Arizona Republicans are working for millionaires and billionaires. They are giving the general populace the middle finger,” he said outside the Tempe bookstore. “I am scared when we give our legislative body a directive and they undercut us.” 

Foster said he knows of two teachers who don’t make enough salary to rent a place of their own, so can only afford to rent a room and take the bus to school. 

Foster said he wishes that programs like home economics, industrial arts and auto mechanics that he had access to when he went to high school in the ’80s were available to his students. Teachers need better salaries, more support and schools need to offer better programs to improve education, he said. He thinks the legislature does not prioritize public education.

“It’s sad that we have to do this,” Foster said of the referendum campaign. “Teachers are having to go to extreme measures to get funding. I think it’s just sad that we have to keep doing this. Our legislature is just trying to undermine our democracy in general.”

Craig Foster outside the Changing Hands bookstore in Tempe
Craig Foster poses for a photo outside the Changing Hands bookstore in Tempe on July 14, 2021, after signing three petitions for the Invest in Arizona campaign. Photo by Laura Gómez | Arizona Mirror

Coheley, the former teacher and volunteer, said funding resources to give teachers more support, like Prop. 208 did, is essential. 

She specifically remembers a day when she was teaching a classroom of 15 kids. One of her students was diabetic. He hadn’t eaten or taken his medication and he was fainting, she said. 

“I’m making a decision while trying to teach a class and saving this kid’s life,” Coheley said. The school nurse was shared with other schools, so no one with medical expertise could help the student. And the school psychologist and social worker weren’t there. Coheley ended up calling an ambulance, and the student spent days in the hospital from the episode. 

Situations like this push teachers out of the profession, and hurts the community overall, Coheley said. 

‘Didn’t we vote on this already?’

Four miles south of where Coheley spoke, a downpour of summer rain didn’t stop residents from going out to sign petitions on Saturday morning, said Georgina Monsalvo, organizer of Stand for Children. She helped set up a signature-gathering tent in a municipal park in Chandler. 

“A lot of people are like, ‘Didn’t we vote on this already?’ ” Monsalvo said about some of the comments she heard from voters who signed petitions. “People are pissed off at the governor and the legislature.”

She added that teachers, parents, business owners, and those who also support charters schools seemed energized to support the Invest in Arizona campaign. 

Monsalvo estimated that more than 100 people showed up to sign the three petitions between 8 a.m. and noon on Saturday morning.

Monsalvo added that she was not surprised by the Free Enterprise Club lawsuit because Prop. 208 also faced legal challenges.

“The opposition is trying to undermine the will of Arizona voters. They know we want better schools, we want teachers to be paid well,” Monsalvo said. “We went through it all with Prop. 208 and we are going to do it again.”

Public education advocates speak to voters in their cars
Public education advocates speak to voters in their cars outside of the Desert Breeze Park in Chandler on Saturday, July 24, 2021 where they were gathering signatures for the Invest in Arizona campaign. Photo courtesy of Georgina Monsalvo for Arizona Mirror

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