by Terri Jo Neff | Mar 15, 2022 | News
By Terri Jo Neff |
The Arizona Department of Revenue announced Tuesday it is working with its tax software vendor to automatically amend any filed 2021 individual income tax returns impacted by the recent overturning of Proposition 208.
The 3.5 percent surcharge on individual income over $250,000 ($500,000 married filing jointly) hit taxpayers starting in 2021, but last week a Maricopa County Superior Court judge struck down Prop 208 as unconstitutional.
Taxpayers who have already filed their Arizona individual income tax returns using current forms and instructions will not need to file an amended return, according to ADOR.
“The Department will hold these returns and process them correctly once it has modified its tax system to remove the surcharge and amend the tax bracket rates,” the statement reads. “At that time, ADOR will automatically adjust the returns to provide for the correct distribution of monies.”
The court ruling which voided Prop 208 will not, however, actually impact an individual’s overall tax liability. The reason, according to ADOR, is legislation signed into law last year by Gov. Doug Ducey which counteracted the surcharge by reducing the state’s top income tax rate for those subjected to the additional tax.
With the Prop 208 surcharge now dropped to 0 percent, the top income tax rate will return to 4.5 percent, ADOR noted.
“Arizona taxpayers will neither owe more tax nor receive a larger refund due to the voiding of the Prop 208 Surcharge,” the statement reads.
Taxpayers who have not yet filed a 2021 individual income tax return are reminded of Arizona’s April 18 filing deadline. ADOR is working as quickly as possible to revise the 2021 tax forms and adjusting the individual income tax brackets to the now proper rates.
State officials are also working with various tax software companies like TurboTax and H&R Block to ensure changes are made to those programs as well.
READ MORE ABOUT PROP 208 COURT RULING
by Corinne Murdock | Mar 12, 2022 | Education, News
By Corinne Murdock |
House Minority Leader Reginald Bolding (D-Laveen) said that those elected officials celebrating the elimination of the income tax increase weren’t leaders in any sense of the word. The Maricopa County Superior Court ruled on Friday that the increased income tax, Prop 208, was unconstitutional because it exceeded the allowed spending limit for what the tax dollars would be purposed for: education.
The remark came after Governor Doug Ducey tweeted that the court ruling was a “win for Arizona taxpayers.” Ducey did note that he anticipated the ruling would be appealed but expressed confidence that the Arizona Supreme Court would also find Prop 208 to be unconstitutional.
Bolding issued similar sentiments in 2018, vowing that Ducey’s support for the demise of a similar tax hike would cost him his election that year. Ducey won comfortably, earning 56 percent of the vote over the Democratic candidate, David Garcia, who earned under 42 percent of the vote.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
by Terri Jo Neff | Mar 11, 2022 | News
By Terri Jo Neff |
Several Arizona legislators along with the Free Enterprise Club and the Goldwater Institute are celebrating a major court victory for Arizona taxpayers after a Maricopa County Superior Court judge struck down the largest tax hike in state history on Friday.
by Terri Jo Neff | Nov 20, 2021 | News, Politics
By Terri Jo Neff |
The Arizona Secretary of State’s Office announced last week that enough valid signatures were turned in to let voters decide next year whether they support substantially reduced income tax rates set to take effect in 2022 or want to maintain the current higher rates.
But whether voters can actually weigh in on such issues in the November 2022 General Election is something the Arizona Supreme Court will likely be asked to decide.
In June, Gov. Doug Ducey signed an overhaul of Arizona’s income tax system as part of the $12.8 billion budget packet approved by the Legislature. It changes the state’s current five-tier income tax rates -from 2.59 percent up to a 4.5 percent base- to a two-tier plan with lower rates in 2022.
The legislation which created the new tax structure could even trigger a single 2.5 percent tax rate as soon as 2023 if Arizona’s revenues meet certain levels.
The flat tax system also addresses the impacts of Prop 208, which voters narrowly passed last year. Known as the Invest in Education Act, Prop 208 imposed an additional 3.5 percent tax surcharge effective 2021 on any income above $250,000 for a single filers or $500,000 for joint filers. The surcharge is on top of the current 4.5 percent base rate.
The revenue from the surcharge is slated to be used for public K-12 schools, but it does so by kicking Arizona’s highest earners to an 8 percent income tax. This put businesses in the state at a competitive disadvantage with Texas and Nevada which have no income tax, while New Mexico has a top rate of 4.9 percent.
Because the 3.5 percent Prop 208 surcharge was put into law by voters, state lawmakers could not directly undo it. Instead, the new flat tax rate plan would top out at 4.5 percent by absorbing the 3.5 percent surcharge.
However, supporters of Invest in Ed, now known as Invest in Arizona, want to void the new tax rate law despite the fact all Arizonans would share in the projected $1 billion savings. The group is trying to kill the flat rate plan by utilizing a provision of the Arizona Constitution which gives citizens 90 days after the legislative sessions ends to attempt to refer new state laws for voter approval.
Last week Invest in Arizona successfully submitted enough valid petition signatures to get the matter on the ballot next November as Proposition 307. In response to the petition drive, Ducey’s spokesman has continued to champion the new income tax structure, which would ultimately be the lowest flat tax in the country if state revenue targets are met.
“It keeps Arizona competitive,” said C.J. Karamargin. “We are returning tax dollars to the citizens of Arizona.”
Whether new laws dealing with state revenues such as income taxes are eligible for voter referendum has never been ruled on by a state court.
A lawsuit by the Arizona Free Enterprise Club argues that the Arizona Constitution actually prohibits issues related to the support and maintenance of state government to be referred to the ballot. A decision by Judge Katherine Cooper of the Maricopa County Superior Court is expected any day.
Whichever side loses in Cooper’s court is expected to appeal, with the Arizona Supreme Court expected to hear the case eventually.
Another wrinkle in the tax saga is that the Arizona Supreme Court ruled earlier this year that Prop 208 can be challenged on the basis of the state’s constitutional spending limits for K-12 schools. The justices recently sent the matter back to the Maricopa County Superior Court for additional arguments although the case is expected to be back at the Arizona Supreme Court early next year.
by Corinne Murdock | Nov 9, 2021 | News
By Corinne Murdock |
Invest in Arizona, a campaign to have voters overturn three Senate bills via a ballot referendum, failed a signature review for at least one of their efforts in their three-prong approach: the ballot to overturn SB1783. The Secretary of State’s attorney, Spencer Sharff, shared this information during oral arguments Friday in the case Arizona Free Enterprise Club, et al. v. Katie Hobbs, et al. (CV2021-011491). The campaign reportedly turned in over 123,500 signatures, but only 100,300 were valid. Signature reviews for the other two are underway.
Invest in Arizona characterized SB1783 as a “direct attack” on Prop 208, the ballot initiative passed last year to accrue more educational funds by imposing an additional 3.5 percent surcharge on taxpayers with an annual income over $250,000 for those filing individually or $500,000 filing jointly.
“It gives wealthy individuals a new loophole to use to avoid paying taxes,” claimed Invest in Arizona.
A ruling is pending in the case, which named both Invest in Arizona and Secretary of State Katie Hobbs as defendants. The plaintiff, Arizona Free Enterprise Club, argued that Invest in Arizona’s referendum would violate the state constitution.
“The Arizona Constitution even provides that legislative actions ‘for the support and maintenance of the departments of state government and state institutions’ may not be the subject of a referendum,” asserted the group. “And as our complaint contends, these provisions ‘provide for, and directly relate to, the generation of revenues that are remitted to the general fund and appropriated to various agencies, departments and instrumentalities of the state government.’ That means they are not referable. It also means that [Hobbs] must refuse to accept for filing, verification, or certification any petition in support of these three referendums.”
As AZ Free News reported, out-of-state donors gave millions to Invest in Arizona. One of their principal donors, the National Education Association (NEA), donated over $2.4 million, $30,000 of which Invest in Arizona refunded. The NEA has come under fire by its state associations and the nation at large after it submitted a letter to the Biden Administration requesting parents and community members protesting or getting involved in school board operations be investigated for domestic terrorism.
Just days later, the Biden Administration heeded the NEA’s request. Attorney General Merrick Garland issued a memo directing the FBI and local agencies to investigate the NEA’s claims. It appears that the NEA was comfortable with reaching out for Garland’s assistance: they submitted formal letters of endorsement on behalf of his appointment earlier this year.
In August, the Arizona Supreme Court found that the majority of Prop 208 was “likely unconstitutional,” but remanded the case to a lower court. The justices determined that the constitutionality of the proposition wouldn’t be evident until revenue is accrued: that is, if Prop 208 exceeds the state constitution’s limits on education spending. If the trial court agrees with the supreme court’s assessment, then Prop 208 would be struck down.
Corinne Murdock is a reporter for AZ Free News. Follow her latest on Twitter, or email tips to corinne@azfreenews.com.
