September 17, 2020
By Timothy Sandefur

The Arizona Supreme Court announced this morning that it will hear two cases brought by the Goldwater Institute, involving the government’s power to tax and to spend.

The first case challenges the constitutionality of subsidies that the city of Peoria gave to a private university. Although the Arizona Constitution’s “Gift Clause” prohibits government from giving or lending money to private businesses, city officials gave almost $2 million of taxpayer money to a school called Huntington University, in exchange for the University’s promise to run a school for its own private profit. What’s the difference between that and giving taxpayer money to McDonald’s to sell hamburgers or Starbucks to sell coffee? None—they’re private companies and should be run with private money. That, at least, is what the Arizona Constitution requires. You can read more about that case here.

The second case involves Pinal County’s illegal tax on retail sales known as Proposition 417. Although state law specifies how counties are supposed to adopt taxes to fix roads, officials with the Pinal Regional Transportation Agency decided to do it a different way—imposing the tax specifically on retail sales (which is not allowed) and then dividing up the tax so that it applies to the first $10,000 of a purchase but not at amounts above that. In other words, buy two $5,000 industrial air conditioners and the tax applies. Buy one $15,000 piece of farm equipment, and you get a discount. State law doesn’t allow that—that would create a labyrinth of different tax rules in Arizona’s 15 counties—which is why the state Department of Revenue agrees with us that the county broke the law. (It’s pretty unusual for us to be on the same side as the state’s tax gatherers!) You can read more about that case here.

In both cases, there will be a round of new briefs filed between now and early November, followed by oral arguments. We expect decisions by spring.

Timothy Sandefur is the Vice President for Litigation at the Goldwater Institute.

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