Proposition could cause economic havoc
This might seem ironic coming from someone who helped frame — then led — the campaign to pass Proposition 301, the largest education tax increase in Arizona history.
But after analyzing the so-called “Invest in Ed” proposal — pushed primarily by the state’s teachers’ union — I came to the strong conclusion that it will devastate Arizona’s economy and will do absolutely nothing to promote academic achievement in our great state.
My rationale is simple: All the elements that made Proposition 301, Arizona’s 0.6 percent education sales tax, a massive success are missing from this ill-conceived initiative.
Proposition 301 worked well because it was crafted in a bipartisan manner, it had input from business groups (large and small), education leaders and a myriad of community groups.
It focused on teacher pay, and no monies were allowed for administration and bureaucracy. It allowed for dollars to go toward functions that increase academic achievement and took a major step in moving toward performance-based funding.
Proposition 301 also increased the opportunity for school leaders to innovate with new public district and charter schools, and it laid the groundwork for the state to take academic standards and assessments seriously: We
established for the first time a school evaluation grading system that measures academic gains in core subject matter.
The policy sought to replace mediocrity with excellence and substitute low-expectations with high-standards. Proposition 301 remains popular today. In fact, the Legislature, this past year, extended it for another 20 years with great fanfare and overwhelming support from Republicans and Democrats.
The Invest in Ed initiative does none of these things. It repeals the prohibition on paying administrators, undoes the accountability provisions, and despite the rhetoric of their advocates, it does not set aside the dollars for teacher pay. It simply creates the real possibility of massive economic upheaval.
There is no doubt this initiative will negatively impact Arizona’s economy. The initiative establishes two additional tax brackets for certain earners and small businesses with a dramatically higher rate.
These new brackets would increase the rates by 76 percent and 98 percent, respectively, which will result in Arizona having the fifth-highest income tax in the nation. Though voters might be persuaded to support an income tax they are not subject to, I would urge all our citizens to think again. We risk damaging our state’s revenue and economic activity.
According to a Wall Street Journal editorial that analyzed the effect of Maryland’s increase on their highest earners to 6.25 percent (a third-less than what is proposed by Invest in Ed) only one year after its enactment, “One-third of the (top-earners) disappeared from the Maryland tax rolls…Instead of the state coffers gaining the extra $106 million the politicians predicted, (top-earners) paid less in taxes than they did last year.”
It is apparent the biggest impact will fall on our small business community, not the wealthy.
Of all small business filers, nearly one quarter produce taxable income of more than $200,000, representing almost 90 percent of the taxable small business income, and 63 percent of all small business taxable income comes from those earning above $500,000.
When there is an increase in personal income tax, it overwhelmingly will affect our state’s job creators.
Arizona’s business community fully understands and is committed to increasing significantly the resources for K-12 education, however, we must generate and deliver those resources in a comprehensive fashion that considers education on the continuum from early childhood through graduate school.
Our education finance system must focus on achievement, on attracting, retaining and paying quality teachers, and we should seek to stimulate — not damage — Arizona’s economy.