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8:47 AM Sat, Nov. 17th

Judge rules tax on rich for education good for ballot

Judge James Smith

Judge James Smith

PHOENIX – A judge has slapped down efforts by the Arizona Chamber of Commerce and Industry to block people from voting whether to hike income taxes on the rich to generate $690 million a year for education.

In an extensive ruling Thursday, Maricopa County Superior Court Judge James Smith acknowledged that, strictly speaking, hiking the top income tax rate from 4.54 percent to 8 percent for those earning more than $250,000 a year actually increases the tax rate on those earnings by 76 percent. Similarly, taking the tax rate for earnings above $500,000 for individuals to 9 percent is a 98 percent increase over the current rate.

But Smith said that did not make it inherently misleading for organizers of the Invest in Ed initiative to describe the tax hikes as 3.46 percent and 4.46 percent, the absolute difference between the current rate and the proposed new ones.

It is true, Smith said, that technically speaking, the 100-word description of the key provisions of the measure, required by state law, should probably have said it was raising the tax rate by 3.46 and 4.46 "percentage points,'' respectively.

"While that likely would be more precise, the existing summaries are not fatally misleading without that verbiage,'' the judge wrote, meaning the use of the smaller numbers is not enough to block a vote.

Attorneys for the chamber had argued the use of 3.46 and 4.46 percent was misleading, causing some people to sign the petition to put the issue on the November ballot who would have balked at a measure described as hiking tax rates by 76 and 98 percent, even just for the rich.

Smith conceded that initiative organizers crafted the description "undoubtedly ... to appeal to potential voters.'' But he said that does not make it inaccurate or misleading.

Anyway, the judge pointed out that the full text of the initiative – including the current and proposed tax rates – were attached to the petitions, so those who might have been confused could check for themselves before signing

Smith also was no more impressed with arguments by Kory Langhofer, attorney for the chamber, that the measure could not be on the ballot because that 100-word description does not mention that the initiative also would eliminate automatic indexing of income tax brackets to account for inflation. That provision is designed to keep people from being bumped into higher tax categories solely because their pay hikes are no more than normal inflation.

Initiative backers deny the measure would affect indexing.

Smith said even if it does repeal indexing – a legal finding he chose not to decide – it doesn't matter.

He said Arizona law requires only that the "principal provisions'' of the initiative be listed in the description. And the judge said the effect of any change in indexing is minimal compared to the key provision of hiking income taxes on the state's most wealthy.

Langhofer already has filed the paperwork for review by the Arizona Supreme Court.

Thursday's ruling actually is a double setback for the Arizona Chamber.

In a potentially more significant finding, Smith also said state legislators acted illegally in enacting a requirement in 2017 that all efforts by voters to enact their own laws must be in "strict compliance'' with each and every election statute.

That change allows initiatives to be kept off the ballot because of largely technical errors in the petitions. Prior to that, courts had allowed measures on the ballot if there was just "substantial compliance'' with election laws.

It was the chamber that pushed the measure through the Republican-controlled Legislature on the heels of voters approving an initiative raising the state's minimum wage from $8.05 an hour at the time to $10.50 now – and eventually to $12 by 2020.

The judge said he reads the Arizona Constitution to provide voters with wide latitude in being able to enact their own laws. And that, he said, means lawmakers cannot tinker with it.

"Legislation requiring strict compliance with every statutory provision regarding initiatives unconstitutionally infringes on separation of powers and fundamental rights under the Arizona Constitution,'' Smith wrote.

The judge said that lawmakers may have had "sound policy reasons'' for erecting the new hurdles for initiative organizers. But Smith said that he, as a judge, lacks the power to alter the substantial compliance standard he finds inherent in the constitution.

Langhofer blasted the judge for voiding the 2017 law.

"This ruling ignores constitutional history and aggrandizes the role of unelected judges at the expense of the people's duly elected representatives,'' he said. Langhofer said he finds no basis for a looser "substantial compliance'' standard anywhere in the constitution, meaning state lawmakers are free to impose it.

The idea behind the power of initiative, put into the Arizona Constitution in 1912, was to give voters a chance to approve their own laws when elected legislators will not.

That, in turn, has resulted in voter approval of a series of measures that the business community – and the lawmakers who support them – never wanted. These range from public financing of elections and legalizing medical marijuana to a ban on leghold traps on public lands and the creation of a state minimum wage higher than required by federal law.

It was that last action that led the Republican-controlled Legislature to vote to impose the "strict compliance'' standard.

Smith's ruling – and Langhofer's appeal – will provide the first opportunity for the Arizona Supreme Court to decide if lawmakers have that power.