Arizona certifies referendum seeking to repeal big tax cuts

PHOENIX - The Arizona secretary of state's office on Nov. 19 certified that opponents of massive tax cuts enacted by the Legislature and signed by Republican Gov. Doug Ducey collected enough signatures to block them from taking effect until voters can weigh in next November.

But the new law slashing income taxes by nearly $2 billion a year by phasing in a flat tax that mainly benefits the wealthy could still take effect if a judge sides with tax cut proponents who argue that it is not subject to a voter referendum.

And even if Maricopa County Superior Court Judge Katherine Cooper rejects that challenge, lawyers for a conservative anti-tax group have teed up a second challenge, this to the validity of the signatures that were filed in September and certified as sufficient on Friday.

"In Arizona, you have to win five or six times if you’re trying to get policies that the governor and the Legislature don’t want," said Joe Thomas, president of the Arizona Education Association, part of the coalition of groups called Invest in Arizona that collected signatures to ask voters to repeal the tax cuts. "And so you have to win lawsuits as you’re filing, you have to win lawsuits when you deliver your signatures. And then even after we (qualify for the ballot) there will be more lawsuits.

The lawsuits challenging the referendum’s legality and the qualifying signatures were filed by the Arizona Free Enterprise Club, a conservative pro-business group that pushes for lower taxes and regulations. Lawyers for the group argued earlier this month that the state constitution does not allow referrals for measures that provide for "support and maintenance" of state government and that tax cut bills fall into that category.

Free Enterprise Club President Scot Mussi did not immediately return calls seeking comment on Friday.

Lawyers for the coalition of education groups said the constitution blocks a referendum only for tax-raising bills, not those that cut taxes.

Cooper has not issued a ruling in that case.

The certified referendum would repeal Senate Bill 1828, which repeals Arizona’s graduated income tax rates, currently between 2.59% and 4.5%, and establishes a flat 2.5% rate once revenue thresholds are met. The vast majority of the tax relief goes to high-earning Arizonans, although proponents say all taxpayers will see some decrease in income taxes.

Tax cut opponents had to file more than 118,000 valid signatures to block the law and place it on the November 2022 ballot. They filed nearly 220,000 signatures, and the Secretary of State's office rejected just over 10,700. The office then sent a 5% sample of the remaining signatures to the state's 15 county recorders for a check. That review found a validity rate of more than 78%, far more than the minimum 43% passage rate.

If it survives the legal challenges, the tax cut repeal will be on the ballot as Proposition 307.

Education advocates failed to collect enough signatures to block two other tax cut bills enacted by the legislature this year. One creates a new exemption for small business income that would have been subject to a voter-approved surcharge, and another shields high-earning Arizona taxpayers from the same 3.5% surcharge approved by voters last year when they passed Proposition 208.

The state Supreme Court in August ruled a part of Proposition 208 that exempts the new revenue from a cap on school spending is unconstitutional, but more legal proceedings will be needed to determine if the entire law will be thrown out.

Arizona’s constitution allows voters to block new legislation by collecting signatures from 5% of the people who voted in the past general election. If they do, the law is put on hold until voters decide at the next general election.