The Arizona Legislature just approved the Goldwater Institute’s plan to dramatically reduce income taxes and simplify the state’s tax code, making Arizona one of the lowest-tax states in the country. This historic reform will restore Arizona’s competitive advantage as a low-tax state and provide a boost for small business owners still struggling to recover from the COVID pandemic.
This plan collapses Arizona’s pre-Prop. 208 tax rates into a single, low 2.5% rate, and it caps the maximum tax rate at 4.5%. This means that no one’s taxes will increase because of Prop. 208. In fact, everyone’s income taxes will go down as a result of this victory.
Additionally, the Goldwater Institute has challenged the constitutionality of Prop. 208, and we’re now awaiting a decision from the Arizona Supreme Court. Fortunately, this new tax reform measure will mitigate the negative effects of Prop. 208—which otherwise would have decimated our economy—and help ensure the state’s future economic success.
With states still feeling the economic damage done by the COVID-19 pandemic, President Joe Biden signed the “American Rescue Plan Act” to give states billions of federal dollars to help them recover. But there’s a catch: The Act effectively prohibits states that take the money from cutting taxes through 2024. That’s unconstitutional—and the Goldwater Institute is joining one legal challenge to it.
Congress can sometimes put conditions on grants to states, but it can’t take advantage of an emergency to coerce states into giving up control of such an important issue of state policy, and it can’t impose a condition on a grant that has nothing to do with the grant’s purpose. That’s why many state attorneys general have filed federal lawsuits challenging this “Tax Mandate”—and it’s why the Goldwater Institute has filed a brief supporting the state of Ohio’s challenge.
THE TAX MANDATE
A provision in the Act says that states cannot use federal grant money to “directly or indirectly offset” a loss of revenue resulting from a tax cut enacted between March 2021 and the end of 2024. If they do, the U.S. Secretary of the Treasury will take the federal money back, up to the amount of revenue the state lost. That appears to mean that states that cut taxes between now and 2024 will have to pay back some or all their grant money.
The Tax Mandate’s defenders say this is just to make sure states actually use federal money for COVID relief. But the Tax Mandate doesn’t actually do that. The Act lists four broad categories of things a state can spend federal grant money on. After states spend the money, they have to report how they spent it to the Treasury Secretary. If the Secretary determines that a state spent money on something that doesn’t fall into one of those categories, she can take that money back.
So if a state receives a grant of, say, $5 billion, it has to show that it spent $5 billion on things the Act allows. If some things it reports weren’t appropriate uses of the money, the Secretary can recoup that portion of the grant. That alone ensures that states spend their federal grants for the purposes Congress intended.
The Tax Mandate, on the other hand, does not help ensure that states spend their grant money properly. Instead, it focuses on whether a state indirectly used federal funds to offset revenue lost as a result of tax cuts. That might make sense if the Act were otherwise designed to deny federal money to states that could afford to pay for their own COVID relief (if they put other policy priorities aside). But the Act doesn’t do that.
By dramatically decreasing the state’s income tax and simplifying its tax code, the governor can help ensure Arizona’s future ideological and economic success.
Now in the twilight of his gubernatorial career, Arizona governor Doug Ducey has the unique opportunity to make history on two fronts. First, if he simply remains in office for the next 18 months, he will become the Grand Canyon State’s first governor since Jack Williams — whose term ended in 1974 — to both enter and leave office during regular election cycles.
This peculiarity began with Raúl Héctor Castro, who succeeded Williams as governor. Castro happily resigned his post a few years later once President Carter had appointed him ambassador to Argentina. Since Arizona does not have a lieutenant governor, then–secretary of state Wesley Bolin ascended to the governorship by virtue of being the state’s next highest-ranking elected official — only to pass away six months later from a heart attack.
Arizona’s constitution stipulates that in such circumstances the third-highest-ranking official is next in line, meaning that the attorney general, Bruce Babbitt, also achieved the governorship without having to run for the office. And on it went. Since then, Arizona has witnessed a gubernatorial impeachment, two resignations, and three more secretaries of state extemporaneously gaining the governorship — making the office of secretary of state much more significant than its otherwise mundane responsibilities would suggest.
Governor Ducey is term-limited at the end of 2022 and so is primed to become Arizona’s first governor in nearly half a century to be both elected to the office and then to actually serve out his full term(s). While this accomplishment is an interesting piece of trivia for political-history buffs, it’s not much of a résumé builder for a politician who may have greater ambitions come 2024.
Two topics that arise year after year, teacher’s salaries and public-school budgets, are often misunderstood and misrepresented. In fact, many say the RedForEd movement was created and nurtured with those misunderstandings and misrepresentations.
The misunderstanding and misrepresentation has led to frustration for taxpayers and parents. Many of whom feel that no matter how much they pay in taxes, nothing seems to get better in kids’ classrooms.
A new study by the Goldwater Institute indicates those feelings and frustrations might be justified.
According to Goldwater, the “20×2020” plan, approved by Arizona lawmakers in 2018, was designed to provide enough funding to give Arizona teachers a 20% raise. However, Goldwater has discovered that schools are not allocating the funds the way lawmakers intended them to be.
In The Truth about Teacher Pay in Arizona: How Arizona School Districts Have Held Back Teacher Salaries, Blamed Lawmakers, and Continually Captured Public Sympathy, Matt Beienburg, Director of Education Policy at the Goldwater Institute found that “school districts used the majority of the new 20×2020 funds simply to replace, rather than add to, existing buckets of state money for teachers (and vice versa). The result: During the 2019-2020 school year alone, teachers received at least $170 million less from their school districts in salary increases than Arizona taxpayers provided for. And it’s part of a decades-long pattern in Arizona education.”
So what are schools doing with the extra funding that is being provided?
“District spending on administration, for instance, has risen by nearly $2,000 in inflation-adjusted terms per class of 20 students, even as teacher salaries were no higher through fiscal year 2020,” according to Beienburg.
Each year, teachers use their own money to buy supplies and decorations for their classrooms and to help offset the consistently growing list of “must buy” supplies sent to parents at the start of the school year. Yet, during the 1983-1984 school year almost 2,000 managers, supervisors, and directors were inexplicably added to Arizona school districts’ payrolls.
Many teachers have expressed frustration about not being a priority and tend to put pressure and blame on lawmakers as part of their demands for more money. It seems, though, that it is the school district administrators who need to feel the pressure and are to blame.
This last year has also placed additional stress on teachers and parents, with virtual and hybrid learning due to COVID-19.
Members of the state legislature requested that the COVID-19 stimulus revenue funds were given for school district use but the Arizona Department of Education (ADE) has declined to distribute much of the millions of dollars.
While it may be easy to blame political leaders and taxpayers for lack of support and failing to prioritize teachers, it seems to many observers that the attention should be on the ADE, school district administrators, and school boards who need to review and reconsider their budgets and priorities.
Arizona voters are asking lawmakers to lead on Empowerment Scholarship Accounts (ESAs), and their voices just got louder.
The state’s ESA program—which allows families to use a portion of the state dollars allotted for their children to pay for private tuition, tutors, and other teaching tools—has transformed thousands of lives both before and during the pandemic. For years, the testimonies of parents have been nothing short of remarkable:
As one mother put it this past year to members of the State Board of Education, “ESA saved my son from a path that would have compromised him on a systemic level…”
From another mom: “I am a parent of three children on ESA, but I also have a master’s degree in elementary education, and ESA has saved the educational lives of my three children…. We have tried public, private, and charter schools… [and] my child was able to meet some of her IEP [Individualized Education Program] goals in four months that no school had helped her to achieve in four years.”
And from a mother in rural Arizona: “I want all to know that this ESA option to educate my children truly saved my family; my oldest has significant disabilities and she attended our public school through her ninth grade year… So many years were spent advocating and begging and pleading for her to be educated, and more importantly, even wanted… ESA has opened up our world to educational opportunities never to be found in the public school setting…”
Now, Arizona lawmakers are on the cusp of extending this same opportunity to thousands more children via SB 1452, which would provide ESA eligibility to low-income and veteran families.
Right now, only special needs students and select other groups, such as children whose parents are on active duty or were killed in the line of service, are eligible to participate in the program. But as Gaby Friedman of the Torah Day School testified to lawmakers in March 2021, the impact of ESAs on kids at her school has shown the need to give the same opportunity to even more families:
“Maya (not her real name) is six, comes from a low-income family, and is disabled…Maya is eligible for the ESA because she is a special needs disabled student…What I thought her story shows is that an ESA works for an individual child…Maya is not the only one with unique needs. There’s many parents out there… and their children aren’t getting the education that they want. Those children might be not disabled…but they need more than what they’re getting. And that’s why this bill is so important.”
Arizona voters increasingly agree.
Multiple recent polls have found overwhelming bipartisan support across Arizona for increasing access to ESAs. Now, a new Goldwater Institute poll has again found massive support among both rural and metropolitan regions of the state. The poll, which was conducted in March and April 2021 across three separate legislative districts (LD4, LD13, and LD25), found that over two-thirds of all respondents, including 70% of Democrats, 67% of Independents, and 71% of Republicans, voiced support for extending program eligibility to all low-income students in Arizona. In contrast, out of the overall sample (N=641), just 21% of voters opposed increasing ESA eligibility.
Conducted March 29– April 6, 2021. N=641. Margin of error <6%. Results above exclude respondents who identified their political affiliation as “Other.”
Union organizers and district superintendents may have the bigger megaphone and messaging apparatus, but our education system ultimately exists to serve Arizona students and their families. Especially in the wake of COVID-19 and the academic disruption unleashed by public school shutdowns over the past year, that truth seems increasingly clear to voters. May it be equally clear to Arizona’s policymakers.
This article was published by the in defense of liberty blog on April 14, 2021, and is reproduced with permission from the Goldwater Institute
