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Arizona Voters Improved State’s Tax Code, Advanced Critical Funding for Schools

Arizona voters approved a ballot measure this week that will make the state’s tax code more equitable while raising hundreds of millions of dollars in badly needed revenue for schools. Two other sound, high-profile ballot measures — in Illinois and California — either failed or remain too close to call, but the Arizona victory joins New Jersey’s new “millionaires’ tax” as an example of equitable, antiracist fiscal policy that other states should follow.

Policy advances that reduce wealth and income disparities are especially important now, with sharp tax collection declines due to the deep recession causing large state revenue shortfalls. States have a choice during economic downturns. They can cut services, which often harms families most in need and worsens longstanding racial and economic disparities. Or they can raise revenue from households at the top, who are least affected by economic downturns, and target the new dollars to schools, health programs, crucial social services for children, seniors, and families, as well as other policies that can mitigate short-term harm and foster a stronger, more equitable recovery over time.

Arizona’s Proposition 208 (the Invest in Education Initiative) takes the latter approach. The new measure will boost the state’s finances, make its tax system fairer, provide big benefits to children and schools, and boost the state economy’s long-term potential. It levies a 3.5 percent tax surcharge on income over $250,000 for individuals and $500,000 for joint filers, bringing the top rate to 8 percent on income above those thresholds. Other rates will remain unchanged: 4.5 percent on income over $159,000 (for individuals) and $318,000 (for joint filers), with lower rates on lower incomes.

The measure will raise a projected $827 million to $940 million a year, all of it dedicated to K-12 schools. It will help each of the state’s schoolchildren while taking a giant step toward educational equity by delivering outsized benefits to kids of color and children in families with low incomes.

This funding is sorely needed. Two decades of state tax cuts prompted policymakers to slash K-12 funding per pupil by nearly 23 percent between 2008 and 2017 (only Florida cut more) to help meet their budget-balancing requirements, even as many states made progress in reversing their deep education cuts stemming from the Great Recession of a decade ago. Arizona pays its teachers less than almost any other state, driving widespread teacher flight that’s hitting rural areas and poor school districts particularly hard.

In contrast to Arizona, Illinois voters rejected the state’s “Fair Tax” proposal, an initiative to raise substantial new revenues for public investment and make the state’s tax system more equitable. Only about 3 percent of Illinois taxpayers would’ve seen a tax increase under the plan, according to the governor’s office, and it would have raised about $3.4 billion a year — a significant infusion that would’ve helped Illinois invest in its future and better meet its needs. And in California, the fate of Proposition 15 — which would raise as much as $11.5 billion a year by partly rolling back a notorious property tax cap enacted in 1978 that has prompted sharp cuts in education and other services — remains too close to call.

Nonetheless, the recent victories in New Jersey and now Arizona will provide real benefits to families and communities in those states, and they offer other states a model for the kind of fiscal policies that can promote a more just and equitable economy, both today and longer term.