Business Groups Claim Arizona Ballot Measure Will Increase Taxes By 80%
Business groups are trying to keep Arizonans from voting on proposals to hike taxes on the most wealthy and give hospital workers a pay hike.
One challenge, filed by a group financed by the Arizona Chamber of Commerce and Industry, alleges that the legally required 100-word description given to initiative petition signers about the effects of the tax increase to generate nearly $1 billion a year for K-12 education fails to adequately describe how it works.
Foes contend that those who were asked to put the measure on the November ballot were never told it was an entirely new tax and how it would result in "a near-doubling'' of the marginal tax rates owed by many businesses.
If that claim sounds familiar, it should. The chamber used it successfully two years ago in its bid to keep a similar measure off the 2018 ballot.
The other from a group financed by the Arizona Hospital and Healthcare Association contends that the initiative process was flawed because it never identified as Service Employees International Union — United Healthcare Workers West as its sponsor and source of its funds.
Foes of this measure also claim that the 100-word description on petitions is "highly misleading.''
David Lujan, the director of the Arizona Center for Economic Progress and the author of the tax plan, said the challenge by the chamber is "disappointing but not surprising," and "the chamber has continually shown that they're more interested in protecting well-paid CEOs rather than helping Arizona schools,'' he said.
The proposal imposes what the initiative calls a 3.5% "surcharge'' on incomes above $250,000 for individuals and $500,000 for married couples. Put another way, it would only be the earnings above that point that would be affected.
Challengers say that obscures the fact that people in that tax bracket already are paying a 4.5% state income tax on earnings at that level.
"Yet by saying the initiative 'establishes a 3.5% surcharge' on this income, the summary gives signers the misimpression that the income is currently untaxed,'' wrote the attorneys for Arizonans for Great Schools and a Strong Economy, the chamber-financed group formed to fight the initiative.
They said it should have been portrayed to petition signers as an 8% tax rate on incomes above the threshold.
"A voter might be willing to tax their fellow citizens 3.5% but not 8%,'' the attorneys are telling the judge. They said that should be listed as an 80% increase. Lujan, however, said there's nothing misleading about it.
For example, Lujan said, a couple earning $501,000 would pay the same tax as now on the money they earn. Then, there would be an additional 3.5% additional levy on $1,000 — the amount at which the tax kicks in, or $35.
Challengers also contend there are other misleading statements in that 100-word description, like the claim that the money would be used to "hire and increase salaries for teachers.'' But they said the actual texts reveals the cash could be spent on those who "support student academic achievement,'' a definition they say could include custodians and bus drivers.
There also is a claim that the measure would have a harsh effect on small businesses whose income tax is reported on their owners' individual tax forms.
But Lujan said that ignores the fact that the tax is imposed not on the gross income of a business but only on what the business owner brings home, after paying all expenses like employees salaries, rent and utilities.
The measure the hospitals are seeking to quash would guarantee 20% raises over four years to certain hospital personnel, impose new infection-control standards on hospitals and put a provision in Arizona law designed to ensure that individuals with pre-existing health conditions can purchase insurance at affordable prices if the federal Affordable Care Act ultimately is voided by the courts or repealed by Congress.
Attorneys for the hospitals, in attempting to keep this off the November ballot, are relying in part on what appear to be technical issues with wording and the failure to define some of the terms. But the lawsuit also takes aim at the claim that the measure, if approved "sets new minimum wages for direct care workers at private hospitals."
Attorney Brett Johnson wrote, "A reasonable voter would interpret 'direct care workers' to mean that wage rates will be adjusted for those directly involved in the care of patients such as a physician, nurse, or an imaging technician." In fact, he said, the text of the initiative instead refers to "direct care hospital workers.'' And it defines that to include nurses, aides, technicians, janitorial and housekeeping staff, food service workers and non-managerial administrative staff — but not doctors.
Johnson also finds fault with the claim that the initiative, if approved, "prohibits insurers from discriminating against pre-existing conditions.'' But he said that doesn't make it clear that it would apply only to health and disability insurance and not things like life or property and casualty insurance.
"This broad overstatement is fraudulent and/or would cause a significant danger of confusion to a reasonable person,'' the lawsuit says.
The lawsuit also takes aim at the wording of another provision designed to protect patients from "surprise out-of-network bills'' they receive after it turns out that someone who cared for them in the hospital was not actually part of their insurer's health care network.
Holly Ward, spokeswoman for the Arizona Hospital and Healthcare Association, said a measure like this is a bad idea in these "extraordinary times,'' mentioning that staffers "are working tirelessly to care for everyone who comes in for care.'' She said, "We don't need to drive costs up for hospitals and ultimately patients."
Rodd McLeod, spokesman for the initiative, said fact that the hospitals are going to court is telling. "This lawsuit is just an admission by the hospitals that they're not going to be able to convince Arizonans to vote against affordable health care at the ballot box so they're going to try to deny voters a chance to have a vote at all,'' he said.
McLeod also took a separate swat at state Sen. Vince Leach (R-Tucson) who signed on as a plaintiff with the hospitals. He said that Leach opposed legislation pushed by then-Gov. Jan Brewer to expand the state's Medicaid program. "So it's no surprise to see him standing with millionaire CEOs and against ordinary families that get stuck with surprise bills,'' McLeod said. Leach did not return messages seeking a response.
Both lawsuits now head to Maricopa County Superior Court, where judges will consider the merits of the arguments. But in both case the final decision is likely to have to come from Arizona Supreme Court.
For more on this, The Show spoke with Howard Fischer of Capitol Media Services.