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'Invest in Ed' initiative already facing legal challenge on road to November ballot

Posted at 7:14 PM, Jul 13, 2020
and last updated 2020-07-13 22:14:53-04

The Invest in Education Initiative is battling a familiar lawsuit in their road to the ballot this November.

Invest in Ed is proposing a tax on Arizona's top earner's income that would tax income above a certain limit. For individuals, the proposed levy would tax income above $250,000 for individuals, and $500,000 for couples at 3.5 percent. $35 for every $1,000 above those income limits.

Arizonans for Great Schools and a Strong Economy, a political action committee funded by the Arizona Chamber of Commerce and Industry, is suing the initiative, claiming the summary on the petition is misleading. The group with the same action that ultimately prevented a similar Invest in Ed Initiative from reaching the ballot in 2018.

The 100-word summary reads:

"The Invest in Education Act provides additional funding for public education by establishing a 3.5 percent surcharge on taxable income above $250,000 annually for single persons or married persons filing separately, and on taxable income above $500,000 annually for married persons filing jointly or head of household filers; dedicates additional revenue to (a) hire and increase salaries for teachers, classroom support personnel and student support services personnel, (b) mentoring and retention programs for new classroom teachers, (c) career training and post-secondary preparation programs, (d) Arizona Teachers Academy; amends the Arizona Teachers Academy statute; requires annual accounting of additional revenue."

"We're claiming with the court, just like last time, It does not purport to explain the actual impact that this will do," said Jaime Molera, the leader of the campaign against the Invest in Ed Initiative, and plaintiff in the lawsuit. Molera claims that the tax will hurt small business owners who file taxes on behalf of their business, who make in excess of $250,000, or $500,000 per couple.

Two of the claims in the lawsuit against the act read:

  • On the other hand, the Initiative was sold to well-meaning petition signers by way of a thoroughly misleading 100-word summary. Nowhere in that summary would voters perceive that individuals and businesses would suffer a tax increase of almost 80 percent rather than facing a new tax of 3.5 percent, or that funding for "teachers" actually extended to any non-administrative employee.
  • The summary also misleadingly implied that the Initiative creates two distinct funding measures in a subtle effort to oversell the amount of funding that it would provide to schools.

"Small businesses, when they file, most of them file as LLC's," said Molera. "They file individual income taxes. So if you have small businesses that are generating that kind of money, and under the levels that they're wanting to tax, this would take Arizona to one of the highest income tax states in the country."

According to the United States Small Business Association, in 2016, the average income for Arizona small business owners was $48,698.

"It is absolutely false," said David Lujan, Director for Arizona Center for Economic Progress. "There will not be one business in Arizona that will pay additional taxes with Invest in Ed."

The Invest in Education Act would reportedly raise more than $900,000,000 to support K-12 education.

"It's going to perhaps tax the income of a few wealthy small business owners, but again those are not your mom and pop businesses," said Lujan. "We knew that our opposition is going to try everything they can to knock us off the ballot."