A Fight Over How Tax Hikes are Passed at the Ballot Box

In Arizona, Republican legislators are asking residents to make it tougher for voters to pass ballot measures that would raise taxes.

Supporters say the proposal, which will be decided in next week’s election, is intended to rein in ballot initiatives that threaten the state’s economy and that are often backed by groups from outside of Arizona. Opponents argue that the change would create a prohibitively high bar to raising funding for key priorities, like education and transportation. 

Others say that the measure fits with a trend, where right-leaning lawmakers and groups are trying to restrict tax and spending measures at the ballot box.

Republican state Rep. Tim Dunn sponsored the bill that placed Proposition 132 on next Tuesday’s ballot. If passed, it would require future measures involving tax hikes to get the support of 60% of voters to pass, instead of clearing the current 50% threshold.

“In the past several election cycles, we've had outside groups coming in and trying to manipulate and spend money in Arizona,” Dunn told Route Fifty in an interview. 

“We don't want to have outside influences raise our taxes,” he said.

The change would be significant in a politically-divided state, where previous tax measures have barely squeaked by. For instance, in 2020, just 51.75% of voters approved Proposition 208, an initiative that raised taxes on higher earners to increase public education funding. 

That initiative was later struck down in court.

Still, Phoenix Mayor Kate Gallego, a Democrat, makes a case that ballot measures “have created some of the more important programs we have in our state.” 

She cited the 2006 First Things First for Children initiative that raised the sales tax on cigarettes to fund early childhood development and health care programs. It won approval with 53.2 % of the vote.

“It would not have passed under the 60% threshold,” Gallego said in an interview.

She also said that Proposition 132, if approved, could undermine the ability of voters to extend a sales tax that funds transportation projects in Maricopa County that will expire in 2025.

Dunn’s initiative has also captured the attention of national groups on the left who see it as part of a nationwide move by Republican state lawmakers to take away voters' power to increase spending, by making it harder to pass initiatives that increase taxes.

“This is part of a larger impact to undermine the will of the people,” Chris Melody Fields Figueredo, executive director of the Ballot Initiative Strategy Center, a liberal group that tracks and assists citizen-driven referendums, said in an interview.

Figueredo said that her group has tracked more than 100 bills pushed by Republican lawmakers around the country this year that would make it harder to put initiatives on the ballot and approve them. The group counted 146 similar bills last year, up from 2017 when there were only 33 that would have changed the initiative process. 

In Arizona, the tax measure is one of three on this year’s ballot that would weaken or narrow ballot measures in the state. 

Proposition 128 would allow lawmakers to change or divert funds from ballot measures approved by voters if either the Arizona or U.S. supreme courts determine a measure is unconstitutional. Proposition 129 would require future voter initiatives to cover only one subject. 

Elsewhere, a measure placed on Arkansas’ ballot this year by the Republican-controlled Legislature would raise the threshold for passing all types of ballot measures from a simple majority to 60%.

“It is very undemocratic,” said Pinny Sheoran, president of the Arizona League of Women Voters. 

“It’s really harmful for ballot initiatives to improve things like public schools and public safety that are critical for our communities to thrive,” added Sheoran, whose group is opposing the measure making it more difficult to pass voter-approved tax increases in her state.

The Arizona measure could thwart the ability of Maricopa County to be able to extend a half-cent sales tax to fund transportation projects.

In July, the state’s Republican governor, Doug Ducey, caught local officials off guard when, citing inflation concerns, he vetoed a bill that would have cleared the way for a ballot initiative asking voters to extend the tax another 25 years.

Gallego said the tax extension is needed to make sure that the “largest metro area in the state has funding for surface transportation, for regional bus service, and to maintain and develop roadways in the fastest growing county in America.”

The veto means supporters of extending the tax may have to win approval for a statewide ballot initiative. Raising the threshold to 60%, “will make it harder to do that,” the Phoenix mayor said.

But to supporters, Proposition 132 would provide a bulwark against what they believe has been an assault by national groups to try to raise taxes and spending in the state. 

Making it more difficult to raise taxes would benefit the state’s economy, Danny Seiden, president and CEO of the Arizona Chamber of Commerce and Industry said in an interview.

“We believe in keeping Arizona the most globally competitive state to do business in the country. And that requires a low tax and low regulatory environment,” said Seiden, previously Ducey’s deputy chief of staff for external affairs and policy development.

“Every single cycle we see a new ballot measure that’s going to raise taxes to fund some special interest or some special projects,” he added. “And it's almost always funded by other states’ special interests. I think we're tired of seeing that happen time and time again.” 

And indeed, the Portland, Oregon headquartered advocacy group, Stand For Children, was the top donor to the campaign pushing the 2020 education measure, contributing $9.2 million, according to ABC15 Arizona. The nation’s largest teachers union, the National Education Association, contributed another $7.7 million.

Dunn, who opposed the education measure, denied that its passage spurred him to propose Proposition 132. “That's an example of outside influences coming in trying to do something within a small populated state,” he said. “But that was not the driving factor.” 

“I just think it’s good policy,” he said of his proposal. He added that he thinks the fact that the slimmest of majorities can pass taxes through a ballot initiative doesn’t fit with the state constitution’s requirement for two-thirds support in the Legislature to raise taxes.

Seiden, with the Chamber, said that should there be a real need to raise more revenue, the business group would work with others to create a proposal that would have enough support to gain approval through either the initiative process or the Legislature. 

He noted that his group supported a 2010 ballot measure proposed by then-governor Jan Brewer, a Republican. The measure, approved by voters, raised the state sales tax by a penny to stave off deep budget cuts due to the Great Recession. 

Meanwhile, some critics have concerns that Proposition 132 could make it harder to change a tax system that they believe increasingly favors the wealthy. 

Arizona is in the process of shifting to a 2.5% flat individual income tax, after tax policy changes approved by the Legislature that were geared toward counteracting the 2020 education funding measure.

The flat tax plan sets Arizona up to have one of the lowest individual income tax rates in the country. But skeptics say a disproportionate share of the benefits will go to higher earners.

“The flat tax will make Arizona’s tax system less fair and more regressive,” said Jon Whiten, a spokesman for the Institute on Taxation and Economic Policy. Raising the bar to 60% would only make it more difficult for voters to raise taxes on higher-income people, he added.

“Like other supermajority requirements for tax increases it’s very problematic,” Whiten said of Dunn’s proposal. “Ballot initiatives are an important tool for revenue and while it doesn’t entirely take it out of play, it makes it so much harder.”

Leading up to the election, those on both sides of the debate said it’s unknown whether voters will be willing to reduce their power through the initiative process to avoid tax increases in the future.

Figueredo took hope in the failure of a measure in South Dakota, in June, that would have also raised the threshold to 60% to pass ballot proposals that would raise taxes. Amendment C, placed on the ballot by the state’s GOP-majority Legislature, received only 32% of the vote.

But Dunn said voters’ concerns about rising inflation could lead them to approve his proposal. “I think this one has a good chance,” he said.