In March 2022, the Goldwater Institute celebrated a victory they had been working years towards: Defeating Proposition 208—a massive, unconstitutional tax hike being pushed by unions and out-of-state special interests. And even though the tax hike being pushed was blatantly unconstitutional and would wreak havoc on Arizona’s economy, defeating it in the courts and legislatively was anything but a cakewalk.
Special Interests bypass the state constitution to pass a tax hike
As Matt Beienburg, Goldwater’s Director of Education Policy, and Jim Rounds, Goldwater Senior Fellow, said in their report, “Arizona embodies the very best of America’s political and economic traditions, from limited and responsive government to thriving entrepreneurship and innovation. Thousands choose the state as their new home each year to escape the economic stagnation and out-of-control tax and regulatory burdens of California and the Northeast.”
Prop 208 wasn’t just bad policy, it was unconstitutional. As Goldwater’s Vice President of Litigation, Tim Sandefur, explains, “Proposition 208 combined an enormous tax increase with requirements for increased spending on schools (which the initiative’s proponents falsely claimed were starved for funding). That was a problem because the Arizona Constitution caps government spending, to prevent the state from spending itself into California-style debts.”
In other words, out-of-state special interests teamed up with Arizona’s largest teachers union to try and do an end-run around the state constitution to pass a massive—and disastrous—tax hike.
Arizona’s elected leaders have seen how states like California have raised taxes year after year to pay for their ever-increasing bloated state budgets. To prevent this type of runaway spending, Arizona enacted spending caps in the state constitution. Invest in Ed (the union-funded organization pushing Prop 208) knew this, so—as Sandefur explains, “Prop. 208’s proponents tried a clever work-around: they added a provision that purported to exempt the initiative from the Constitution itself—declaring that the money the tax was supposed to raise should not be calculated as part of the legal spending formula.”
Despite the blatantly unconstitutional aspects of Prop 208, it made its way on the ballot and passed with a narrow majority of 51.7% in 2020. But Goldwater’s team refused to let this unconstitutional tax hike stand.
Defeating Prop 208 in the courts and in the Arizona Legislature
Because Prop 208 would have unquestionably violated Arizona’s constitutional caps on state spending, Goldwater’s team challenged the initiative in court. The case made its way through the state courts and eventually made it to the Arizona Supreme Court.
It didn’t take long for the State Supreme Court to see how Prop 208 thumbed its nose at the state constitution. In a unanimous decision, the Arizona Supreme Court declared that Prop. 208 must obey the Arizona Constitution’s spending limits. The justices sent the case back to the trial judge with instructions to strike down the initiative if it would require the state to spend more than the constitutional spending cap. And in March of 2022, the trial judge did just that.
Sandefur described the victory against Prop 208 as, “a relief not only to the job-creating small businesses in Arizona who were the main targets of this tax increase, but also to Arizonans reluctant to see the state head down the path of over-taxation and over-spending that have undermined so many other states. The safeguards against overspending that Arizona voters added to the state Constitution in the 1990s were designed to prevent special interest groups from taking more of the people’s hard-earned money to fund an ever-growing state bureaucracy. The effort by those special interests who drafted Prop. 208 to immunize themselves from the state’s highest law has therefore rightly fallen short. And that’s a good thing for Arizona’s economy and the rule of law.”
In addition to defeating Prop 208 in the courts, Goldwater’s team worked with state legislators on a plan to dramatically reduce the state’s income taxes, move the state closer to a flat income tax system (thus simplifying the tax code), and making Arizona one of the lowest-tax states in the country.
The battle against tax hikes and big government spending is a perpetual one, but thanks to SPN partner organizations like the Goldwater Institute, free market and limited government champions are winning important victories for taxpayers in Arizona and across the country.
