January 13, 2022

By Timothy Sandefur

The Goldwater Institute yesterday filed a brief with the Arizona Supreme Court urging the justices to block efforts by pro-tax forces to revoke recently-enacted tax cuts by referendum. If successful, that referendum runs the risk of blocking any future efforts to reduce state taxes—an extreme consequence that, we argue, the court should avoid by enforcing common-sense limits on the referendum process.

Arizona’s Constitution lets voters hold a referendum to repeal a law adopted by the legislature. But there’s an exception: laws “for the support and maintenance of the departments of the state government” are not subject to referendum. That phrase refers not only to laws that spend money to maintain state agencies, but also to laws that raise money—that is, tax laws. In other words, Arizona’s recently enacted tax relief measures should be exempt from the referendum process.

But in December, a state trial court judge ruled that the tax cut was subject to repeal, reasoning that only spending laws—not tax laws—are exempt. That makes little sense, because laws imposing taxes are, naturally, “for the support” of state government, even if they impose lower taxes than existed in the past. Any law that raises money to “support” the state falls within the constitutional prohibition on referenda. And in a 1992 case called Wade v. Greenlee County, the Arizona Court of Appeals said just that. Yet in this case, the judge refused to follow Wade on the grounds that it was decided by the Tucson-based Second District instead of the Phoenix-based First District. That doesn’t make sense, however, because in Arizona, trial courts must obey both of the state’s courts of appeals.

Now that the case has been appealed to the state supreme court, we’ve filed a brief arguing that Wade was rightly decided and should be followed. All tax laws are laws “for the support” of state government and are therefore exempt from the referendum. We point out that federal courts have followed a similar rule in cases involving the federal Constitution’s provisions governing tax laws: those courts have said that any law that relates to tax is “a bill for raising revenue,” even if those laws cut taxes. After all, determining whether a law will actually increase or reduce government revenue is extremely difficult—and is not something courts are well suited to do.

There’s another concern, too. The Arizona Constitution’s so-called Voter Protection Act makes it impossible for the legislature to repeal or amend either an initiative or a referendum. The legislature isn’t even allowed to pass laws that “indirectly” conflict with a referendum. What exactly would that mean here? If the legislature is barred from passing a law indirectly conflicting with the repeal of a tax cut, would that forbid the people’s elected representatives from ever reducing taxes? That’s a question no court has ever addressed, and it’s a hard one, because it would run the risk of tying the legislature’s hands on perhaps the most important of government’s powers. And that, we argue, is all the more reason for the Court to simply enforce the common-sense reading of the Constitution’s restrictions on referenda: laws “for the support” of state government are simply not subject to that power.

You can read our brief here.

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

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