Is Ducey breaking tax promise?
Economists split on how to define move to extend ed-funding levy
Doug Ducey sailed to the governorship four years ago in part because of his often-repeated pledge to not raise taxes — ever.
“I’m not gonna raise taxes,” Ducey said during one candidate debate that centered on education.
In a signed pledge “to the people of Arizona,” Ducey wrote, “I will oppose and veto any and all efforts to increase taxes.”
The up-and-coming Republican repeated the one-
liner, or versions of it, during debates and one-on-one conversations with voters, in campaign literature and, later, in gubernatorial speeches.
While campaigning, he boasted about successfully leading an earlier effort to stop the extension of an existing sales tax to fund education, calling it an “increase.”
The GOP-controlled Legislature passed legislation Thursday to implement a tax to fund education, and now all eyes are watching how Ducey will explain his apparently looming signature on it.
The governor is under mounting pressure to adequately fund public education — but will signing the legislation break his own pledge?
His spokesman, Daniel Scarpinato, posted on social media Thursday evening that Ducey would sign the bill but did not say when. Scarpinato, in an interview with The Arizona Republic, said Ducey’s administration does not consider the legislation a violation of the governor’s pledge.
“It doesn’t increase taxes,” he said, adding that “no one wanted it to expire, and the governor has been on record of wanting to extend it. And not extending it would have created a huge fiscal cliff. The support has been widespread for extending it. The definition of a tax increase is that taxes increase. Under this, taxes do not increase.”
The governor was posting his own congratulatory social media messages to lawmakers and education advocates after the vote.
The timing couldn’t come with higher stakes for Ducey, who wants voters to return him to the executive office in November. At the same time, some lawmakers in competitive districts are facing pressure from two directions.
On the one hand, many of their constituents are clamoring for meaningful action on education funding, but on the other, they could be squeezed by conservative groups that score lawmakers for their votes on taxes and spending.
Lawmakers approved a new tax to extend a six-tenths of a cent sales-tax rate for public education. That rate was first approved by voters in 2000 via Proposition 301.
Implementation of the rate would not increase funding for education, but would maintain the status quo for 20 years.
It generates about $600 million in funding each year for schools and is set to expire in mid-2021. The money funds teacher salaries and classroom expenses — two expenses that have emerged as political flashpoints under Ducey’s tenure.
The legislation is intended to buy state leaders time to come up with a more comprehensive way to reform and fund public education.
The legislation required at least a two-thirds vote of members of both chambers because of a voter proposition, passed in 1992, known as Proposition 108. That proposition requires any increase in state revenues be approved by a supermajority in both the House of Representatives and the Senate.
The new legislation technically does not extend the current sales tax, which is voter-protected. Doing that would require a three-quarters vote in each chamber, said Michael Braun, executive director of the Arizona Legislative Council. Rather, the tax would kick in only after the existing tax expired in 2021.
“The existing (tax) is going to expire, and the new one that’s going to go through today will start after the expiration of the existing one — just a second or two, but still,” Braun said Thursday. “One expires, the next one kicks in . ... Because that is a new tax, that requires Prop. 108.”
Grover Norquist — an anti-tax crusader and founder and president of Americans for Tax Reform, a Washington, D.C., organization that opposes tax increases — said Thursday evening that by his definition, the legislation is a tax increase.
“It’s not a new tax, but it is a tax increase,” Norquist said, adding, “If you didn’t pass this law, taxes would be lower . ... If you take a tax increase that was going to expire and extend it, you have raised taxes.”
Kevin McCarthy, president of the Arizona Tax Research Association, also considers the legislation a tax increase. But the group supports the legislation, based on the merits of the need for the policy.
“Anytime there’s a sunset on a tax ... certainly, reauthorization of that is a tax increase,” he said. “One of the reasons they’ll be able to muster the two-thirds votes to do it and get enough Republicans to vote on it is those Republicans see it, in their mind, as a continuation of an ongoing tax. That makes the optics of it different than if it was brand new.”
But Howard Gleckman, a senior fellow in the Urban-Brookings Tax Policy Center at the Urban Institute, disagrees that extending the tax rate is the same as a tax increase. People will be paying the same amount of tax, he said.
He described the debate as an ideological question with “no right answer.”
“It is not a tax cut, but it is not a tax increase,” Gleckman said. “A lot of conservatives will say you could pay zero tax if the tax expired, so if you’re extending something that would have expired, you’re going from paying a zero tax to paying something.
“It’s kind of an ‘angels on the head of a pin’ kind of argument. For me, common sense is, if you’re paying the same amount of tax after the bill passes as you were before, it’s not a tax increase.”
Last spring, in a major policy shift for the governor, Ducey said he wanted to see Prop. 301 extended as education groups and many business leaders were promoting expanding the tax. But he wouldn’t call it a tax. “Things haven’t changed — there are not going to be any new taxes,” Ducey said at the time when asked if he supported extending the tax. “This is a funding program, and we’re going to continue a funding program.”
But by his own standards, extending a tax has been considered a tax increase.
During his 2014 run for governor, Ducey boasted about leading the charge to oppose a 2012 ballot measure known as Proposition 204.
In 2012, Ducey branded Prop. 204 a tax increase — even starring in a video ad — and his efforts brought him widespread attention and raised his profile as a hold-the-line stalwart on taxes and spending.
That ballot initiative would have made permanent a temporary 1-centper-dollar sales-tax increase that was set to expire in 2013. Much of that money would have funded education.
Voters eventually defeated the measure, with 64 percent turning it down.
Scarpinato said the comparison to Thursday’s decision is unfair.
“That was a temporary tax that was sold to voters as a temporary tax ... and the discussion in 2012 was about then extending it into perpetuity forever and ever and ever,” he said. “This was a 20-year sunset on something that was never billed as a temporary tax, but a long-term funding solution.
“The idea was after 20 years, policy makers would get to the table and make a decision over whether it was needed, whether it had worked, and I think the conclusion is it is needed and it did work.”