2020 education ballot measure proposes 'tax surcharge' for high-income earners

On the first day of the 2020 legislative session, Arizona education leaders announced the return of a ballot measure to raise nearly $1 billion for education by taxing the state's wealthiest residents.

The Arizona Supreme Court knocked the first iteration of the Invest in Education Act initiative off the 2018 ballot just a few months before the election, spurring an outcry from the teachers who spent months collecting signatures. 

Joe Thomas, president of the Arizona Education Association, announced the latest effort at the Arizona Capitol on Monday morning. Supporters will need to collect at least 237,645 signatures from voters to qualify for the ballot. 

"The community helped us craft this," he said. "They support our educators, they support our students and they want to create great public schools for every student in the state."

The 2018 effort gathered nearly double the amount of signatures needed in just a few months. 

This year's version of Invest In Ed is similar to what educators proposed two years ago. The measure would increase taxes for single filers earning more than $250,000 or married filers earning more than $500,000. It would raise an estimated $940 million every year for education. 

Invest In Ed is not the only education tax measure that could appear on the 2020 ballot. Arizona legislators have introduced proposals to reform an existing education sales tax measure, Proposition 301. 

The Arizona Chamber of Commerce, which opposed the initiative in 2018, is approaching the new proposal with "deep, deep skepticism," Garrick Taylor, executive vice president with the Arizona Chamber of Commerce, said. 

"Proponents of a tax increase will have to convince Arizona voters that Arizona, which has a billion dollars in its 'rainy-day fund' and is approaching a billion dollars in cash, somehow needs higher taxes," he said. 

Income tax on the state's wealthiest 

The measure would create a 3.5% tax surcharge for single individuals making more than $250,000 or married couples making more than $500,000.

The current income tax rate in Arizona for someone making $159,001 or more is 4.5%. Arizona's average income tax rate is one of the lowest in the nation. 

The money would go to the following, according to an Invest in Education press release: 

• 50% would go to K-12 public school teacher and classroom support staff salaries.
• 25% would go to schools for student support services staff. 
• 10% would go to teacher mentoring and retention programs at the school level to keep teachers from leaving the state.
• 12% would go to career and technical education programs. 
• 3% would go to the Arizona Teachers Academy, an initiative to stem Arizona's teacher shortage by waiving college tuition and fees for future teachers who agree to work in Arizona schools.

Recent education funding investments

Education leaders first proposed Invest In Ed in April 2018 during the #RedForEd walkout, when tens of thousands of teachers walked out of their classrooms and to the state Capitol for a week to protest stagnant salaries and classroom funding. 

In response, Gov. Doug Ducey rolled out a plan to raise teacher salaries 20% by 2020. So far, the Legislature has sent enough money for a 15% raise — the last 5% is expected in the upcoming budget. 

Ducey has also increased education funding in other areas, but educators have said it's still not enough to restore all the cuts made during the Great Recession.

The #20by2020 teacher raises in all will cost the state $644 million, compared with the nearly $500 million Invest In Ed would raise for teacher and support staff salaries. 

Teacher salaries have steadily climbed since the launch of Ducey's salary increase plan, but the amount depended on the district or charter school. Ducey and the Legislature left it up to the district or school to distribute the funds, and some chose to give teachers less so they could also give raises to support staff. 

Why didn't Invest In Ed make it to the 2018 ballot? 

The Arizona Supreme Court voted 5-2 in August 2018 to remove Invest In Ed from the ballot after the Arizona Chamber of Commerce challenged the measure in court.

The opinion, raising questions over the independence of Arizona's governor-appointed judicial branch, stated that the referendum was not clear enough. 

The justices wrote that the act as written did not just raise taxes on the wealthiest and "fails to mention that the measure modifies the inflation indexing of income tax rates that was adopted in 2015, thus exposing most taxpayers to tax increases."

The average Arizonan would have seen about a $16 tax increase due to that, had the proposal taken effect as written.

The court also said the description of income-tax rate hikes for high earners — the key portion of the ballot measure — was ambiguous because it described the changes in rates as percent increases, not percentage-point increases. 

Progressive education leaders condemned the Supreme Court decision, accusing the governor of wielding influence over the justices he appointed to keep the measure off the ballot. 

David Lujan, director of the Arizona Center for Economic Progress, said the ballot language this time refers to the tax as a "surcharge tax" and is separate from existing income tax. 

Another critical factor, he said: This measure's language will go through legislative counsel before the organization begins collecting signatures.

"I think it's structured much differently," he said. 

Other measures possibly in the works 

Since #RedForEd, education organizations, Republican lawmakers and business leaders have all floated plans to raise more revenue for education. 

Sen. Sylvia Allen, R-Snowflake, this session has introduced a fix to an existing education tax, Proposition 301, which voters extended in 2018. If approved by lawmakers, that fix would have to again go through voters, taking up space on the ballot.

In 2019, Allen also introduced a penny sales tax initiative. With voter approval, her proposal would have increased the education sales tax rate to one penny, from its current 0.6 cents. The bill, however, died during the session. It's unclear if she will introduce the bill again this year. 

The Helios Foundation, an Arizona nonprofit, unveiled a proposal in August to increase Arizona sales and property taxes to fund an additional $1.5 billion for education.

That group has not yet moved forward with the proposal. Helios President Paul Luna in August said it first wanted more community input to determine whether the proposal should go on the ballot.

Reach the reporter at Lily.Altavena@ArizonaRepublic.com or follow her on Twitter @LilyAlta.

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