April 20, 2021
By Timothy Sandefur

The Arizona Supreme Court will hear arguments this morning in the Goldwater Institute’s lawsuit challenging the Proposition 208 tax increase. Representing a group of taxpayers, business owners, and legislators, the Institute’s legal team is asking the justices to approve an injunction that would postpone implementation of the tax until its constitutionality can be decided. But the argument is likely to include a wide-ranging discussion of the initiative’s two main constitutional flaws: its attempt to evade the Arizona Constitution’s limits on spending, and its efforts to get around the Arizona Constitution’s rules for adopting taxes. 

The Arizona Constitution imposes restrain on state spending by establishing a commission that uses a complex formula to determine how much the state can afford to spend. But Prop. 208 asserts that it is exempt from this process—something that is illegal, since Prop. 208 is not a constitutional amendment, and cannot therefore evade the rules in the state’s highest law. And although the Constitution prohibits the creation of “any act” that increases taxes unless it gets the votes of two-thirds of the people’s elected representatives, Prop. 208 ignores that rule and imposes a tax directly.

The initiative’s backers argue that the spending limit includes an exception for “grants,” and that Prop. 208 creates a “grant,” but this argument is weak given that the word “grant” typically means voluntary payments like awards or scholarships—whereas Prop. 208 imposes an ordinary tax and requires the government to spend money in certain ways. No wonder that nobody ever suggested that Prop. 208 creates “grants” until after this lawsuit was filed.

The state Supreme Court took the case on an expedited basis in order to resolve the legal questions involved as quickly as possible. That makes it likely that the justices will issue a brief, single-page order when they decide the case, and issue a more in-depth opinion only after having time to review the complexities. No decision is expected today.

If this unconstitutional tax is allowed to stand, Arizonans will be throwing away their tax dollars on a plan that will yield few benefits. As a Goldwater Institute report released last fall found, Prop. 208 is likely to cost the state 124,000 jobs and $2.4 billion in revenue in just the first 10 years of the tax. And though the initiative is purportedly an “education funding” plan, out of the hundreds of millions of dollars Prop 208 would raise via higher taxes, it would put just 13 cents of each new dollar toward increasing teacher pay.

Today’s oral argument—which is the Institute’s tenth time appearing before the Arizona Supreme Court—will be presented by former Arizona Solicitor General Dominic Draye, accompanied by attorney Brett W. Johnson and Goldwater Institute Vice President for Litigation Timothy Sandefur. The argument will be live-streamed on the Supreme Court’s website. Briefs and other background information about the case is available here.

The Goldwater Institute will continue to keep up the fight against Prop. 208, so taxpayers won’t have to fund an illegal tax that doesn’t improve education but does worsen Arizona’s economy.

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

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