Arizona- Battle over Ballot Wording Over; Arizona Voters to Decide on Tax Increase to Fund Education

Listen to a brief overview of state tax developments this week, including Arizona, or read full Arizona development below.

Detailed Arizona Development

Recently, the Arizona Supreme Court ruled that the description of a ballot initiative was not deceptive, and the measure was, therefore, eligible to be placed on the November ballot. If approved by voters, the Invest in Education Initiative would impose a 3.5 percent income tax surcharge on taxable income above $250,000 annually for single persons or married persons filing separately, and on taxable income above $500,000 annually for married persons filing jointly. The measure is expected to raise more than $900 million a year for Arizona public K-12 education. Opponents of the measure argued that (1) the 100-word description of the principal provisions in the Initiative was fraudulent or substantially confusing to reasonable Arizona voters, and (2) the compensation paid to petition circulators did not comply the law.  With respect to the wording, the opponents argued that by calling the tax a “surcharge” it downplayed the magnitude of the tax increase (i.e., the fact that affected taxpayers subject to Arizona’s current highest rate would see their taxes increased by almost 80 percent). In addition, the description failed to note that businesses structured as pass-through entities would be affected by the increase. After a Maricopa county superior court judge enjoined the measure, the matter came before the Arizona Supreme Court.   In a brief ruling with an opinion to follow, the Court unanimously ruled that the wording of the measure did not create a significant danger of confusion. The court also found that the evidence presented on the issue of payment to signature gatherers did not warrant the invalidation of the petitions.  This November, voters will decide a number of significant state and local tax measures. Please stay tuned to TWIST for additional updates. 

This Week's Developments

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Featured Speaker

Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US