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Proposition 126 – The Protect Arizona Taxpayers Act

by Expect More Arizona

Background

Earlier this year, a group called Citizens for Fair Tax Policy (which is funded by an arm of the Arizona Association of Realtors) collected enough signatures to refer an initiative, Proposition 126, to the ballot that changes the Arizona Constitution to prohibit a tax on any service that was not already taxed as of December 31, 2017. These services could include things such as realtor services, haircuts, dry cleaning, landscaping, child care, etc.

What a YES vote means

A “yes” vote on Proposition 126 supports this constitutional amendment to prohibit the state and local governments from enacting new taxes or increasing tax rates on services performed in the state.

What a NO vote means

A “no” vote on Proposition 126 opposes this constitutional amendment, thereby retaining the power of the state and local governments to enact taxes on services in the future.

Why is this important?

Taxes are complicated, to say the least. No one loves to pay them, but without tax revenue, state and local government wouldn’t have the funds to operate and to provide the infrastructure and services citizens rely on. So, when there is a desire to improve or expand infrastructure and services, conversations often take place about potential tax revenue sources, either temporary or permanent.

For most states, personal income taxes or general sales tax generally make up the largest percentage of tax dollars. Here’s the breakdown for Arizona based on 2016 data from the U.S. Census Bureau:

 

What this proposition does

Proposition 126 would change the constitution to prevent service providers from having to pay new or additional taxes, thereby protecting Arizona taxpayers from having to potentially pay more for those services, as such costs are often passed off on the consumer.

However, this proposition takes a revenue tool off the table without bringing all sides to the table to talk about possible future implications.

What this proposition doesn’t do

There is no impending effort to increase or place new taxes on services. In 2016, a bill was introduced in the Arizona House of Representatives to tax certain services, including beauty and nails, pet grooming, child care, and more. However, the bill was introduced in conjunction with a proposed cut to income tax rates. As such, the proposal would have restructured taxes or expanded the tax base, but not necessarily increased the overall tax burden on service providers. The bill never received a hearing or vote, and did not pass.

Our position

Expect More Arizona will not take a position on Proposition 126 as we are not tax policy experts and this measure does not definitively impact education. However, as we continue to advocate for a long-term solution for education funding – pre-K through career – we felt it was appropriate to provide information to voters about this measure.

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