Taxpayer Victory! AZ Supreme Court Denies Pro-Tax Forces’ Challenge to Goldwater’s Flat Tax

The Arizona Supreme Court today delivered a big victory for taxpayers with a brief decision that blocks efforts by pro-tax forces to revoke Arizona’s recently-enacted tax cuts. The tax relief law, SB 1828, which the Goldwater Institute helped to write and pass last year, establishes the nation’s lowest flat income tax rate—simplifying the state’s tax laws and reducing the tax burden for hard-working taxpayers.

We’re proud of that work because in these difficult economic times—with inflation on the rise and the economy still suffering from the chaos of the pandemic—it’s crucial to keep taxes low and uncomplicated. But Invest in Arizona—an organization devoted to increasing the size and burden of government—sought to repeal SB 1828 by placing it on the ballot as a referendum.

Arizona Constitution’s allows laws to be repealed through the referendum procedure, but the Constitution limits that procedure, too—and it specifically doesn’t allow tax laws to be subjected to referendum. It says “laws immediately necessary for the preservation of the public peace, health, or safety, or for the support and maintenance of the departments of the state government and state institutions” are exempt from the referendum power. And tax laws are “for the support and maintenance of the departments of the state government.”

Nevertheless, a Maricopa County trial judge said the referendum could proceed, on the theory that because SB 1828 reduces taxes instead of increasing them, it therefore was not for the “support and maintenance” of government. The judge claimed that only spending bills, not tax bills, fall within this provision.

But as we argued when the case was appealed to the Supreme Court, that makes no sense. Tax laws obviously “support” the government—and this provision was written after a disastrous experience in Oregon, where voters had used the referendum power to interfere with the legislature’s budgeting process in ways that created havoc in government policy.

Today’s ruling—which comes only two days after the case was argued before the justices—is a brief, two-page order that promises a more detailed opinion later. But it squarely declares that “S.B. 1828 do[es] fall within the support and maintenance exception to the Arizona Constitution, and thus may not be referred to the voters.”

That’s an important victory for Arizona taxpayers, given that our economic recovery depends on entrepreneurship, development, and growth—all of which are hindered when government takes more of what people earn. The next step is to accelerate implementation of the flat tax—and perhaps reduce the state tax burden further—so that Arizona’s hard-working business owners, employees, and entrepreneurs can help ensure the Grand Canyon State’s economy continues to thrive.

You can learn more about the case here.

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