CASA GRANDE — A clash between educational and economic resources in Arizona may seem incongruous, but Proposition 208, which is currently on the ballot in Arizona, has sparked a debate over its call to increase the tax rate for the state’s wealthiest earners in order to fund teacher pay and other education support services.

On a panel on Friday morning, David Lujan, executive director for the Arizona Center for Economic Progress, and Sean McCarthy, a senior research analyst at Arizona Tax Research Association, sparred over the merits, or lack thereof, of the plan.

During the hour-long discussion, Lujan and McCarthy disagreed over basic facts and what the proposition’s tax would be used for. Lujan said Prop. 208 would help reverse a decades-long trend of divestment in Arizona schools, while McCarthy claimed the proposition would cause businesses and wealthy retirees to steer clear of the state and possibly even prompt current residents to move elsewhere.

Where the two arguments seemed to mesh was in whether local economic benefits are best derived from a well-educated workforce or large outside investment.

“Arizona has the worst teacher shortage crisis in the country,” Lujan said. “One of the most effective strategies that states can do to improve their workforce is to invest in the public education system.”

McCarthy claimed Trump administration economic advisers Art Laffer and Stephen Moore as examples of economists who were strongly against the proposition, predicting it would cost Arizona 400,000 jobs over 10 years and a $2.4 billion loss in state and local taxes.

“Regardless of how much you feel about spending more, you have to have sound tax policy,” McCarthy said. “We need to make sure Arizona tax policy makes sense.” McCarthy warned that high-end filers, who currently find Arizona’s tax policy “attractive” and “competitive,” would move elsewhere if their taxes increased.

“If we are going to shock the economy, hurting the most successful ranchers, farmers and businesses, how are you going to tell me education is going to get better?” McCarthy said.

Overall, the proposition calls for a 3.5% surtax on individuals making $250,000 and joint filers making over $500,000. According to Lujan, for individual filers, that amounts to paying $35 more per year for every thousand dollars above that threshold.

McCarthy claimed the majority of money from the proposition would go to end-of-year bonuses for teachers. That is based in part on the assumption that the variability in the tax base would mean that a regular salary increase couldn’t be guaranteed.

Lujan did not believe this would be an issue. “By distributing the Prop. 208 revenue directly to schools so that legislators cannot touch it or control it, schools will know they can count on that funding from year to year,” Lujan said. Other critics have taken aim at the fact that not all of the money would go to teachers, but to other school staff. Lujan countered that workers such as school counselors, nurses, aides, bus drivers, cafeteria and facility workers all played an important role in educating students.

Some major factual disagreements were over Arizona’s tax code and where support for the proposition was coming from. McCarthy claimed Arizonans are “already paying a lot more than their fair share” in taxes and accused Lujan’s group, and other supporters of Prop. 208, of being “outside money” with no consultation of business officials or superintendents. However, Lujan contended Arizona has a regressive tax system after decades of cuts and cited organizations including the Arizona PTA and Helios Education Foundation as key endorsers.

Lujan also said that the studies they’d seen claim the wealthiest 1% tend to move less in response to tax rates; McCarthy acknowledged “nobody is saying you will see a dramatic departure on day one” but warned of private concerns among businesses.

Although they both agreed that Arizona was ranked very low in national education rankings, based on funding per capita, McCarthy said that if Arizona only went up one or two spots, as it would after income from Prop. 208, “you won’t feel much better about it.”

Under the current plan, Pinal County would expect to benefit from Prop. 208 in the form of $38 million in additional revenue, which would be divided among school districts. Throughout the entire state, Prop. 208 is expected to raise $940 million annually, although that number is contested by opponents, including ATRA, due to potential year-to-year changes in tax collections from high-end earners.

The proposition was originally proposed in 2018 but was struck from the ballot by the Arizona Supreme Court. Its primary funding has come from the political action committee Invest in Education, which is led by a Glendale high school teacher, Amber Gould, who is also the Arizona director of the National Education Association.

The panel was hosted by Pinal Partnership and moderated by Jordan Rose from the Rose Law Group.

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