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Budget & Finance

Tax Higher Incomes to Fund Schools? National Debate Gets Traction at the State Level

By Evie Blad — October 28, 2020 3 min read
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The highest income earners should pay more taxes to provide more funding for education.

That was and common refrain in the Democratic presidential primaries, and a key part of former Vice President Joe Biden’s K-12 platform. It’s also on the Nov. 3 ballot in one state, where arguments about that measure mirror those taking place on the national level.

Arizona Proposition 208 would enact a 3.5 percent income tax surcharge on taxable income above $250,000 for an individual or $500,000 for those filing jointly. Currently, the highest marginal tax rate is 4.5 percent. All of that new money would go to K-12 education, with half of it designated to “hire teachers and classroom support personnel and increase base compensation for teachers and classroom support personnel.”

As national politicians have campaigned in Arizona, a critical state for the presidential contest, they’ve also weighed in on the ballot proposal, linking it to larger discussions about income inequality, tax policy, and public support for education.

“This is the richest country on Earth, and we should have the best education system in the world,” Independent Vermont Sen. Bernie Sanders said in an Oct. 16 endorsement of Proposition 208, using a line that he may have said on the primary debate stage about his own presidential platform.

Opponents of the proposal seized on Sanders’ support.

“They have some deal in Arizona where your taxes are going to go way up. You know that right?” President Donald Trump said at an Oct.19 reelection rally in Tucson.

Trump’s arguments against the state ballot measure are similar to those he’s used against Biden, who has said he will raise taxes on annual incomes above $400,000 to help pay for his domestic priorities, including a massive expansion of federal education funding.

Arizona Details

The Arizona proposition is somewhat unusual because state education funding questions more frequently rely on property tax increases or vice taxes on things like gambling and marijuana, said Damion Pechota, a policy analyst at Education Commission of the States who tracks ballot measures.

Other states may consider similar questions in the future, especially as public schools struggle to recover from the effects of the coronavirus pandemic, extended building closures, and sinking state and local revenue.

Colorado voters considered a similar proposal in 2018 that would have raised income, corporate, and property taxes, but it failed with 46.4 percent voting yes.

Backers of Arizona’s proposal have worked on the effort for years, seeking to seize on interest generated by teacher activism there in recent years. Organizers at Invest in Ed, a group that is backed by national teachers unions, say the funding would help reduce class sizes and ensure quality teachers remain in the state.

Arizona approved a law in 2018 to increase teacher salaries by 20 percent over a three-year period. “But that money, all of which was placed in districts’ general funds, was spread out in uneven ways, with teachers in various districts receiving anywhere from no raise at all to, in one instance, an 18 percent raise, according to an analysis by the state’s department of education,” Education Week reported at the time. “Many finance experts fear that sort of uneven pay schedule across the state could exacerbate the teacher shortage in the state’s most rural areas.”

In addition, Arizona lags behind some other states in education funding, the ballot issue backers say.

“Arizona’s teacher shortage crisis was caused by a decade of funding cuts to education, while the wealthy got state and federal tax breaks,” says the Arizona chapter of Stand for Children, an organization that supports the initiative.

Proponents say the proposal would raise about $940 million a year for schools, but state budget analysts estimate less, about $827 million a year.

Opponents, including the state’s chamber of commerce and Republican Gov. Doug Ducey, argue the new tax could stifle economic growth and hurt small businesses. They also question whether the measure has enough guardrails to ensure that the new money will go to the most pressing educational priorities.

“It would be the equivalent of hanging a sign over our state that said, ‘Look elsewhere,’” Ducey said at an Oct. 15 visit from U.S. Secretary of Education Betsy DeVos, according to the Arizona Republic. “All the pipeline of people and opportunities that are coming to Arizona would be hurt.”

Photo: Getty