“All three bills directly provide for the support and maintenance of the state, were key aspects of the state’s budget, and therefore are not referrable by Invest in Arizona."”

Scot Mussi, Arizona Free Enterprise Club

By Howard Fischer
Twitter: @azcapmedia

PHOENIX — An organization that pushes for lower taxes and less government regulation is trying to deny Arizonans the option to decide whether they want to approve or veto the $1.9 billion in tax cuts enacted last month by the Republican-controlled legislature.

In new court filings, attorney Thomas Basile contends the right of Arizonans to second-guess decisions of the state legislature does not extend to measures “for the support and maintenance of the departments of state government and state institutions.”

Basile, representing the Arizona Free Enterprise Club and Scot Mussi, its president, does not contend in his legal papers that successful petition drives would leave the state without the revenues needed to run the government. In fact, if the referenda on the three measures succeed and the tax cuts are canceled, it actually would leave Arizona government with a lot more money than needed to cover anticipated expenses.

But he essentially is arguing to Maricopa County Superior Court Katherine Cooper that is legally irrelevant. Basile urges her to read the constitutional right of people to refer measures to the ballot as precluding a public vote on anything dealing with taxes.

Mussi, in a prepared statement, defended that interpretation.

“All three bills directly provide for the support and maintenance of the state, were key aspects of the state’s budget, and therefore are not referrable by Invest in Arizona,” he said.

Basile and Mussi want Cooper to not only declare the three ballot measures illegal but also to block Secretary of State Katie Hobbs from accepting any petitions gathered and putting them on the ballot.

His arguments are going to get a fight from Roopali Desai.

She represents the Invest in Arizona Committee. That’s the organization that started out as Invest in Education and first got voters to approve Proposition 208 in November imposing a 3.5% surcharge on taxable incomes above $250,000 a year for individuals and $500,000 for married couples.

She said Mussi and Basile are misreading the constitutional restrictions.

“Understandably, if you have the legislature imposing a tax for the purpose of state operations ... then it makes good policy sense that you would not be able to refer that,” Desai told Capitol Media Services.

“It’s a completely different fact pattern when you have the elimination or reduction of a tax, which obviously means you can not make the argument that, ‘Oh, that tax was necessary to operate the state,’” Desai continued. “Ironically here, our position is by eliminating these taxes it’s really going to create hardship, not just for education but for many other things.”

At the heart of the fight are three separate measure approved by Republican lawmakers which, taken in total, will enact tax cuts that largely benefit the most wealthy.
One scraps the current graduated income tax rates of from 2.59% to 4.5% over the next three years in favor of a flat 2.5% rate.

A second seeks to limit the impact of Proposition 208 on the wealthy by setting an absolute limit of 4.5% on all income taxes, including that 3.5% surcharge.

And a third creates a method for the owners of small businesses to escape the surcharge entirely by creating an entirely new tax category for them.

Backers need 118,823 valid signatures on each of the three measures by Sept. 28 to place them on “hold” until the November 2022 general election. That’s when voters would get the last word on whether to ratify or reject each of them.

Mussi told Capitol Media Services he rejects any contention that, in seeking to block a public vote on the tax cuts, he is denying voters a say in the process.

“This tax reform package wasn’t adopted by unelected bureaucrats,” he said.

“It was voted on and approved by 90 lawmakers duly elected by the people of the state of Arizona,” Mussi continued. “The tax package was signed by a governor duly elected by the people of the state of Arizona.”

In arguing that the measures can’t be referred to voters, Basile relies on a 1992 ruling by the state Court of Appeals.

In that case, the judges, relying on the same constitutional provision he is using here, quashed a referendum to overturn a decision by Greenlee County supervisors to impose a half-cent sales tax.

Desai, however, said that precedent provides no help to Basile because the facts are different. And the main one is that the county was seeking to hike taxes to keep government operating, not to cut them.

That point was underlined by appellate Judge Joseph Livermore who wrote the court’s opinion.

“Permitting referenda on support measures would allow a small percentage of the electorate, in Arizona 5%, effectively to prevent the operation of government,” he wrote, thwarting until at least the next election the decision of a majority of the supervisors to fund “necessary government programs.”

“The functioning of government can be as effectively damaged by the inability to acquire funds as by the inability to spend them,” Livermore wrote.

Desai said there’s another potential flaw in the litigation. She said it’s premature.

She said the question of whether the measures can be placed on the ballot are not ripe to address until after the petitions are turned in and after the secretary of state has verified there are enough signatures. Desai said she doubts courts would move to block the secretary of state from accepting the petitions before it’s even known whether there will be enough names on them to force an election.
No date has been set for a hearing.