Superior Court Judge refuses to follow strict compliance

UPDATE: Hours after Maricopa Superior Court Judge James D. Smith struck down the state’s strict compliance law in a controversial decision regarding the ballot initiative to increase the individual income tax rate, Judge Daniel Kiley issued a minute entry in the lawsuit against the clean energy initiative which upheld strict compliance. Judge Kiley stated “the Court sees no basis for the Committee’s assertion that such a standard, applied by other courts in other jurisdictions with similar constitutional provisions, would impose an intolerable burden on the right to initiative in Arizona.”  These conflicting opinions are setting the stage for a battle at the Arizona Supreme Court.

In a controversial and far-reaching ruling that may extend beyond the original lawsuit, Maricopa Superior Court Judge James D. Smith on Thursday struck down the state’s strict compliance law in a decision regarding the ballot initiative to increase the individual income tax rate.

Arizonans for Great Schools and a Strong Economy argued in court this week that a ballot initiative petition to raise the individual income tax rate is so flawed that the proposition should not appear on the 2018 ballot.

The lawsuit maintained that the proponents of the ballot initiative did not strictly comply with Arizona’s statutes, a law that was enacted by the Arizona Legislature in 2017. The law required ballot measures adhere to a strict compliance standard for judicial review, rather than just substantial compliance, meaning those seeking to legislate at the ballot box must follow all aspects of the law without flaw.

The plaintiffs asserted that the proponents of the initiative misled voters with their description of the tax increase impact, did not disclose whether petition circulators were paid or served as volunteers and that the initiative description fails to disclose the repeal of an existing law that annually adjusts each income tax bracket for inflation.

But according to Judge Smith, applying strict compliance to initiatives “unconstitutionally violates Arizona’s separation of powers doctrine and infringes on the people’s reserved power to legislate via initiative.”

The controversial ruling comes as a shock to many, and Arizonans for Great Schools and a Strong Economy Chairman Jaime Molera vowed to appeal to the Arizona Supreme Court.

“Today’s ruling is obviously a disappointment,” Molera said. “Respectfully, it’s also wrong. Our elected state legislators wisely passed into law a bill that would ensure the judiciary applies a strict compliance standard to initiatives, the same standard that applies to referenda. Adopting an initiative via the ballot box is lawmaking; it should be treated as such.”

The ballot language description that accompanied the petition that was presented to voters states that the initiative would raise “the income tax rate by 3.46% on individuals’ incomes over a quarter million dollars (or household incomes over half a million dollars), and by 4.46% on individuals’ incomes over half a million dollars (or household incomes over a million dollars).”

According to the lawsuit, that description was “materially false and misleading.”

The ballot initiative proposes increasing the highest income tax rate from 4.54 percent to 9 percent, which would actually be a 98.2 percent increase, not 4.46 percent. Similarly, the proposed 3.46 percent increase would actually result in an increase of 76.2 percent.

Arizonans for Great Schools and a Strong Economy contends that percentage point is what should have been written in the ballot initiative description printed on the petitions.

The lawyer for the initiative proponents, Jim Barton, argued that prior initiatives have used percent as an absolute value and that the difference between percent and percentage point is still in dispute.

Arizonans for Great Schools and a Strong Economy brought Jack Cheng, an assistant principal and former math teacher, to the stand and had him read from Pearson’s textbook Using and Understanding Mathematics: A Quantitative Reasoning Approach to define these two terms.

The textbook says, “when you see a change or difference expressed in percentage points, you can assume it is absolute… if it is expressed with a percentage sign or the word percent it should be a relative change or difference.”

Cheng confirmed that Pearson’s definition is synonymous with how he would explain the difference between these two terms to his students.

In addition to the battle over percentage versus percentage point, the two sides argued whether the initiative backers misled voters by not including in the ballot description the removal of an existing tax law to adjust tax brackets for inflation.

Known as tax indexing, this adjustment of tax rates keeps pace with inflation and prevents lower and middle-class individuals from paying higher income taxes when they are not experiencing any real increase in purchasing power.

A June memo from Arizona Legislative Council General Counsel Ken Behringer and Executive Director Michael Braun states that the proposed initiative would reverse this tax relief for all taxpayers.

Barton argued that the initiative language does not end the current tax law, and even if the rollback of the law did occur, “it is not a serious provision” of the measure.

“We look forward to taking this matter up on appeal at the state Supreme Court, but make no mistake: We are confident that, should this highly flawed initiative appear on the November ballot, Arizona voters will soundly reject this risky tax scheme,” Molera said.

Lorna Romero

Emily Richardson

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