Scottsdale Faces New Lawsuit From Goldwater Institute Over Sales Tax Hike

Scottsdale Faces New Lawsuit From Goldwater Institute Over Sales Tax Hike

by | Jun 27, 2025 | News

By Matthew Holloway |

As the City of Scottsdale stands poised to enact a staggering $2.2 billion budget, city leaders must now contend with a new lawsuit from the Goldwater Institute challenging the city’s controversial sales tax increase.

As of the council’s June 10th meeting, the city has reportedly agreed to spend up to $90,000 in taxpayer dollars on the outside law firm Osborne Maledon to defend it.

In June 2024, the Goldwater Institute challenged the newly approved 0.15% sales tax, which was pitched to voters as a “replacement tax,” for an unrelated, expired 0.2% Land Acquisition Tax.

Goldwater won that legal battle, “forcing the city to admit that it was raising, rather than lowering taxes,” according to a press release.

Under the Arizona Constitution, such a tax hike must be approved by at least 60 percent of voters, a threshold the city did not meet in the 2024 election. Scottsdale leaders, however, have enacted the tax.

On Friday, June 3rd, the Goldwater Institute filed a lawsuit against the city, panning the tax as “unconstitutional.” It stated that, “Supermajority rules help protect minority voices, prevent special-interest-driven decisions, and force governments to clean up their budgets before reaching for more of your money. Just like any responsible household, city, county, and state officials should look at how they’re spending first—not just always demand more, regardless of what the law and economic commonsense demand.”

Scott Day Freeman, writing for Goldwater added, “Scottsdale is ignoring the state’s constitutional mandate—requiring us to go to court yet again.”

City Attorney Sherry Scott’s summary to the city council stated, “The budget implications of not defending this case are $25 million per year for the next 30 years.” The law firm, earning approximately $912 per hour at the taxpayer’s expense, is fighting the Goldwater Institute’s efforts to seek an injunction that would stop the tax from taking effect on July 1st, along with a declaratory judgment that the tax is unenforceable.

Freeman said, “Our clients seek only a declaration that the tax is unlawful and an injunction to stop it being enforced. Our clients do not seek a refund or damages.”

Scottsdale spokesman Kelly Corsette stated, “The city is confident its ballot item and election result comply with the Arizona Constitution and all applicable election laws.” He claimed that “the 60% tax approval threshold does not apply to local ballot measures: it is in a section of the constitution that regulates statewide initiatives and referendums, not in the separate section of the constitution applicable to city initiatives and referendums.”

In its press release, the Goldwater Institute maintained that, “In 2022, Arizonans strengthened those protections by amending the Constitution to require any tax passed through a citizen initiative or referendum receive at least 60 percent approval to become law—a requirement that applies not just to statewide, but also to local ballot initiatives.”

Matthew Holloway is a senior reporter for AZ Free News. Follow him on X for his latest stories, or email tips to Matthew@azfreenews.com.

Maricopa County Superior Court Judge Strikes Down Prop 208

Maricopa County Superior Court Judge Strikes Down Prop 208

by | 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.

Judge John Hannah’s ruling bars enforcement of Proposition 208, which imposed a significant income tax surcharge on small-business owners and individuals making over $250,000 a year. Prop 208, also called the Invest in Education Act, was narrowly passed by voters in November 2020 and was immediately challenged in court on multiple grounds, including a conflict with Arizona’s Constitution.

Governor Doug Ducey called Hannah’s ruling “a win for Arizona taxpayers,” adding that it is marks “another step in undoing the damage of Prop 208 and making sure we continue to benefit from having the lowest flat income tax rate in the nation.”

The Goldwater Institute-sponsored lawsuit was filed in February 2021 on behalf of numerous taxpayers, small business owners, and legislators. Last summer, the Arizona Supreme Court agreed with the plaintiffs’ argument that the surcharge taxes from Prop 208 were considered “local revenues” subject to spending limits under the state’s Constitution.
The Justices sent the case back Hannah for a determination of whether Prop 208’s Local Revenues Provision runs afoul of the Constitution’s Education Expenditure Clause by violating that limitation. In a decision today, the judge agreed that Proposition 208 violated the Constitution.

“This Court understands the remand order as a direction to declare Proposition 208 unconstitutional in its entirety, and to enjoin its operation permanently, if the Court finds as a fact that the annual education spending limits imposed by the Arizona Constitution will prevent Arizona’s public schools from spending a ‘material’ amount of Proposition 208 tax revenue in 2023,” Hannah wrote in his ruling. “On that basis, the Court is obligated to strike down Proposition 208.”

Reaction to the ruling came swiftly, despite a possibility the Justices may be asked by the losing parties to review Hannah’s order later this year.

“While we expect the ruling may be appealed, we are confident the Arizona Supreme Court will find 208 unconstitutional, as they did last year. Arizona is – and will remain – a state that knows how to prioritize education while keeping taxes low and attracting jobs,” Gov. Ducey said.

Senate President Karen Fann, one of the plaintiffs, called Friday’s ruling “a major victory” against an initiative she said misled voters by trying to get the tax-and-spend hike around the Constitution.

“Out-of-state special interests tried to deceive our voters,” Fann said after Hannah released his ruling. “We are thrilled that this job-killing tax hike won’t go into effect.”

Many attributed the success of the lawsuit to the work of the Goldwater Institute which pointed out concerns with Prop 208’s constitutionality well before Election Day in 2020.

“Today’s decision puts a nail in the coffin of the unconstitutional, job-killing Proposition 208, and it cements Arizona’s position as the national leader in lower taxes and building a stronger economy,” said Victor Riches, President and CEO of the Goldwater Institute.