Income tax indexing debate dominates hearing

Arizona Legislative Council has finalized the written summaries of four ballot initiatives that could appear on the November ballot. The bipartisan committee, which consists of lawmakers from both the Arizona House of Representatives and the Arizona Senate, debated extensively the best way to inform the public about the impacts of each ballot measure.

The purpose of the committee is to “adopt impartial analysis of the four measures that may appear on the November ballot,” according to Mike Braun, Executive Director of Legislative Council who facilitated the hearing.

The group took action to finalize summaries for the following ballot initiatives:

Given the controversy surrounding many of the proposed ballot measures, the hearing was much more animated and better attended than usual. The committee action ranged from minor wordsmithing to heated debates, especially around the measure to increase the income tax.

Much of the debate centered on the income tax indexing language in the proposed measure. Indexing refers to the adjustment of tax rates to keep pace with inflation.

Braun informed the committee that the initiative provides “no statutory authority for the Department of Revenue to adjust the brackets.”

The proponents of the measure claim their language maintains the existing tax relief for lower and middle-income families.

Joshua Buckley, chairman of the proponents’ committee, alleged that the non-partisan attorneys from Legislative Council “read our initiative wrong and are making an inference that is not there.”

Yet, according to a June 20 memo from Legislative Council General Counsel Ken Behringer and Executive Director Michael Braun, the proposed initiative would reverse this relief on all taxpayers. The drafters of the ballot initiative failed to include the correct reference to maintain the existing tax law.

“After today’s discussion, it remains unclear whether the drafters of the initiative to nearly double the income tax on small business intended to dismantle the tax bracket indexing law, or whether they were just sloppy,” said Jaime Molera, chairman of Arizonans for Great Schools and a Strong Economy. “The outcome, however, remains the same: this initiative hurts all taxpayers.”

The inflation issue is also the subject of a lawsuit filed by Arizonans for Great Schools and a Strong Economy. The group contends that proponents of the tax increase measure failed to disclose this broad tax increase in the summary provided to voters on the ballot petition.

The lawsuit also argues that the description of the income tax increase on the petition is misleading. The petition description alleges that income taxes will only increase by 3.46 percent and by 4.46 percent, but the plaintiffs note that the initiative actually increases the top marginal tax rate on incomes by 76.21 percent and 98.24 percent, respectively.

The ballot summaries are part of the publicity pamphlet the Arizona Secretary of State’s office sends to voters, which includes the official ballot language, a fiscal analysis by the Joint Legislative Budget Committee, and arguments for and against the ballot initiatives submitted by groups and members of the public.