Prop 208: Bad Deal for Arizona

September 21, 2020

“Arizonans have a business decision to make at the ballot this year. Proposition 208 seeks to nearly double the top income tax bracket. The question each voter must ask is, can Arizona afford to become a high-tax state without severe economic consequences?”

That’s the question posed in a new Arizona Republic op-ed out today from Rounds Consulting Group President (and Goldwater Institute Senior Fellow) Jim Rounds and Arizona Tax Research Association President Kevin McCarthy. And the answer is a resounding no.

As outlined in a new Goldwater Institute report released last week, the economic impacts from Prop 208 would do immense damage to the Grand Canyon State:

The impact to Arizona is estimated at 124,000 lost jobs and $2.4 billion in lost revenue to state and local governments in just the first 10 years. Roughly half of the filers affected by this tax increase will be owners of small to medium sized businesses. The related economic and tax revenue losses will ultimately result in cuts to other areas of government; including public safety, higher education and child safety.

Furthermore, write Rounds and McCarthy, this tax increase from Prop 208 could end up scaring new businesses away:

Prop. 208 would give Arizona the ninth-highest overall tax rate in the country, far ahead of peer competitor states like Texas, Nevada, Utah and Colorado. We estimate future business locations to Arizona will drop by 15%.

The calculated losses use conservative estimates and don’t factor the impact of those who will move to avoid the tax. A Stanford study on migration patterns of wealthy filers suggests roughly 8% will leave Arizona to avoid the tax hike on top of losing a similar percentage of future wealthy movers who would otherwise choose Arizona.

You can read the full op-ed here.