The campaign Invest in Arizona filed signatures on Sept. 28, 2021, for two veto referendums aimed at overturning bills designed to change income tax brackets and small business income taxes in Arizona. Both of the bills would impact tax revenue associated with Proposition 208, an initiative passed in 2020. Proposition 208 enacted a 3.5% income tax surcharge, in addition to the existing income tax (4.5% in 2020), on income above $250,000 (single filing) or $500,000 (joint filing).
One of the targeted bills, Senate Bill 1828, would reduce the state’s income tax brackets from four to two and further reduce the tax brackets to a flat rate when state revenue exceeds $12.976 billion. The other bill, Senate Bill 1783, would replace the individual income tax that certain small business owners file with a new small business income tax.
With signatures filed for the veto referendums, both of the bills are suspended until the secretary of state determines if enough signatures are valid to qualify the measures for the ballot. If enough signatures are found to be valid, the targeted bill would remain suspended until voters decide the issue at the November 2022 general election. If not enough valid signatures were filed, the targeted bill would go into effect.
More signatures were filed for the referendum against SB 1828 than SB 1783. Invest in Arizona reported filing more than 215,000 signatures for the SB 1828 referendum. It reported filing about 123,500 signatures for the SB 1783 referendum. At least 118,823 signatures need to be valid.
Joe Thomas, president of the Arizona Education Associated, said, “Today’s filing is an effort to stop another one of the Governor’s reckless attempts to hand out money to the wealthy while disregarding the will of [Arizona] voters or the impact on our public schools.” Scot Mussi, president of the Arizona Free Enterprise Club, responded, “The teachers union and an out of state interest group hired hundreds of paid circulators to go around the state lying to Arizona voters about the tax cuts passed by the state legislature.”
Invest in Arizona filed a veto referendum against a third bill, Senate Bill 1827, but it did not collect enough signatures for that proposal. SB 1827 was designed to cap the maximum combined individual income tax rate at 4.5%.
The Arizona Legislature passed all three of the bills in June 2021, and Gov. Doug Ducey (D) signed them. Votes were along party lines, with Republicans supporting the bills and Democrats opposing them.
Arizonans last voted on a veto referendum in 2018, when a majority voted to repeal a bill expanding the state’s Empowerment Scholarship Accounts (ESAs) program to make all public school students eligible to apply for an ESA. Since Arizona adopted a referendum process in 1911, voters have decided 35 veto referendums. Voters upheld 19 bills and rejected 16 bills.