Arizona Gov. Doug Ducey updated the real estate community Friday on the state鈥檚 strong economic recovery from the pandemic and his policy priorities for his two remaining years in office. 

A 鈥漛alanced approach鈥� to reopening businesses and Arizonans doing their part to reduce spread of the disease helped the state recover more quickly than most of the nation, the governor said.

鈥淎fter a year of turmoil and challenges, we are seeing our state return to normal,鈥� he told about 250 attendees at a virtual 鈥渂reakfast鈥� meeting of the nonprofit , which represents real estate developers in the Phoenix metro area. 

鈥淎ll of our schools are fully reopening. We鈥檝e lifted occupancy limits on our local businesses. We鈥檝e recovered over 97 percent of the jobs we’ve lost since the start of the pandemic. We鈥檙e on pace to add over 300 new jobs by next spring.鈥� 

Stayed on track despite attacks from far right and left 

After the initial shutdown of all but essential businesses last year, Ducey gradually brought the economy back in phases, which earned criticism from both the political right and left throughout. 

But the approach worked, he said. Infection rates have dropped significantly and Arizona ranks in the top five states for the strongest economic recovery. This month, Ducey lifted almost all restrictions on businesses while social distancing and safety protocols remain in place.

鈥淯nlike other states, we never did a shutdown here in Arizona. We withstood the calls from the extremes on both sides, and we will continue to ignore them,鈥� Ducey said. 鈥淲e always knew that fighting this virus would be dependent on the personal responsibility of everyday Arizonans.鈥�

At the front of the priority list 

Now that the Legislature is in session, progress is being made on a number of the policy agenda goals Ducey laid out in Bills that have passed or are expected to pass this session include expansion of telemedicine statewide, wildfire prevention and inmate firefighter training, a new gaming compact, and a law to protect businesses and others from frivolous Covid-19 lawsuits. 

In listing his priorities, Ducey emphasized a few at the front of the line: meet the demand for Covid-19 vaccines; open schools and catch up students who fell behind during the pandemic; and maintain Arizona鈥檚 growing status as a competitor for industry and high paying jobs. 

Meanwhile, Arizona can expect to continue to outpace the rest of the nation moving forward, he said.

Vaccine supply should exceed demand by May 

Arizona鈥檚 mass vaccinations efforts have become a role model for the nation, Ducey said. The state has now distributed more than 2.6 million doses with more on the way. 

Arizona was the first state to launch a 24/7 mass vaccination site at the State Farm Stadium, home of the Arizona Cardinals. Last Monday, the total number of vaccinations distributed to the stadium hit the 500,000 mark, Ducey said. Other vaccination sites were also launched at Phoenix Municipal Stadium, the University of Arizona and Chandler-Gilbert Community College. 

Ducey said the only remaining challenge is meeting demand. He is working with federal officials to increase the number of doses to Arizona in the coming weeks, and has been told that supply should exceed demand in May. 

Top priorities moving forward 

Looking ahead, the picture is also bright, Ducey said. New stimulus funding coming into the state, including $12.3 billion for state government, and a growing economy, Arizona will be able to achieve most of his policy , he said. They include:

• Infrastructure projects including expansion of broadband statewide

• Mitigate the impact of Proposition 208 on small businesses 

• Assistance for students who fell behind during the pandemic 

• Planning and new technology to protect Arizona鈥檚 water supplies for the future 

• A new state gaming pack with the tribes to expand casinos on reservations and approve sports betting statewide

• Smart energy policy to ensure reliable and affordable energy  

• Forest fire prevention and protection efforts including work training programs for inmates to learn firefighting skills 

In closing, Ducey stated his commitment to keep taxes low and regulations light. He said he wants private industry to know they are a priority for the state. 

鈥淲e realize it’s a competitive situation. We’ve been winning more of our fair share of businesses choosing Arizona as a headquarters site over places like California, Texas, Florida, Tennessee, Utah, and Colorado. There鈥檚 no reason we can鈥檛 keep that going for decades in the future. Our economy is truly diversified with more on the way.鈥� 

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Dozens of economic development and business groups were disheartened in the wake of the passage of Proposition 208, which imposes a high personal income tax on the state鈥檚 top earning individuals. 

They are bracing for the impact and strategizing on how to mitigate the damage. The tax increase will impact tens of thousands of small businesses in Arizona who file their taxes under the individual tax code, not the corporate tax code.

鈥淲e are obviously disappointed that this has passed, but not entirely surprised because we had been closely monitoring the polling data from the beginning and it seems pretty clear that the more voters learned about the downside of this proposition, the less likely they were to vote in favor of it,鈥� said Suzanne Kinney, president of the Arizona chapter of the NAIOP that represents the commercial real estate industry.

Reading the small print

With more than 3.2 million votes cast, the proposition by 51.75 percent to 48.25 percent on Friday. 

Many voters simply were not aware of the true implications of the tax hike, Kinney said. They assumed it would only affect wealthy individuals, not small business owners. 

鈥淲e ran out of time to get that message across to a sufficient number of voters and that鈥檚 where we saw a very narrow win for this proposition. That being said, it will be the law of the land, and we鈥檙e looking for ways to move forward and mitigate the damage that it could cause.鈥� 

Bracing for what鈥檚 ahead

Under the new tax hike, Arizona is now one of the highest income tax states for top earners. 

The marginal income tax rate will almost double for individuals who earn $250,000 or more, and couples earning $500,000 or more, from 4.5 to 8.0 percent, a 77.7 percent increase.   

An analysis of IRS data鈥攕upplemented by additional modeling and adjustments to identify only those Arizona taxpayers directly affected by the rate increase鈥攔eveals an estimated 90,000 Arizona tax filers will be affected, according to the. Of these, more than 50 percent would be small business owners.

Unintended consequences

Also, the drafters of the proposition failed to adjust for inflation, said Chad Heinrich, Arizona state director for the National Federation of Independent Business (NFIB), a leading voice for small business.聽聽

鈥淧rop. 208 ignores a well-established tenet of taxpayer protection that drives a stake further into the hearts of Arizona small business owners,鈥� Heinrich said. 鈥淲ithout an annual adjustment for inflation, each year, more small business owners will continue to find themselves subject to the 77.7 percent increased income tax rate. Even those businesses with steady, but not increasing, business income will eventually be snared in the Prop. 208 trap.鈥�

Moving forward

Economic development professionals said the new tax will make it tougher to attract new investment to the state. 

They are already strategizing on how to move forward and mitigate some of the damage including:

New tax strategies to help small businesses

There may be some lifelines on the horizon that would allow for some creative tax strategies to help, said Tim Lawless, president of Commercial Real-estate Executives for Economic Development (CREED).

With the new Prop. 208 tax and the passage of many school bond and override elections bringing in more dollars for education, that could free up more tax dollars for other uses, he said. 鈥淲ayfair鈥� legislation signed by Governor Doug Ducey last year also is generating new tax revenues for the state. The legislation requires remote sellers and marketplace facilitators to begin filing and paying transaction privilege tax. 

Lawless, whose organization has fought to bring down Arizona鈥檚 commercial property rates, said another reduction there could help the state remain competitive, he said. 

鈥淓very major task force that has looked at our tax code over the past 25 years has identified high commercial property taxes as the top impediment — even more than income taxes — to job creation,鈥� said Lawless, referring to previous groups like the Citizen Finance Review Commission. 

Ramp up marketing of Arizona鈥檚 business-friendly attributes 

Kinney, of NAIOP, said her organization is moving into overdrive to work 鈥渉and-in-hand鈥� with economic develop groups statewide and economic development departments of cities and towns to communicate Arizona鈥檚 many remaining positive attributes including:

-More affordable housing than many other markets

-Affordable land prices

-An abundance of office space

-Excellent universities that produce high level employees

-Excellent community colleges that provide a steady workforce for mid-level positions 

-Good infrastructure with easy access to different markets

鈥淲e are also looking at an industrial boom in the West Valley with all the distribution centers coming on line. That still remains,鈥� Kinney said. 鈥淲e still have an excellent interstate system where companies can get their products from those distribution centers in less than a day to tens of millions of consumers.鈥�

Take a new look at Arizona鈥檚 voter ballot initiative process   

Kinney and others are most concerned that companies and industry will pass over Arizona for neighboring states with lower or zero income taxes. 

She said the state needs to take a look at Arizona鈥檚 voter ballot initiative process that has been largely taken over by out-of-state interests, making campaigns harder and more expensive to battle. Voters often are left in the dark about the nuances of such initiatives.

Once an initiative is locked in to state law, reversing it is no simple task, often requiring a new voter initiative to be approved. An attempt by the Legislature to alter a voter-approved measure requires a three-fourths vote of the state Legislature in both houses and it must further the purpose of the original initiative.   

鈥淭he business community is extremely concerned that our citizen initiative process has been hijacked by out of state interests,鈥� Kinney said. 鈥淲e believe that that was not the intent of the founders of our state to have ballot propositions funded almost entirely by large groups outside of Arizona. This is yet another example of why we need to reform our initiative process so we can reclaim it for the residents of Arizona.鈥�

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Of the $21,601,892.48 contributed towards the 鈥淚nvest In Education鈥� Political Action Committee, the group backing Proposition 208, only .7 percent of all contributions 鈥� just $151,411.44 鈥� came from individual Arizona donors. 

The pro-Proposition 208鈥檚 third quarter and campaign finance reports reveal that nearly all of the group鈥檚 funding continues to come from wealthy donors, unions and special interest groups 鈥� all from out-of-state.

, , the editorial boards of the and , as well have urged Arizonans to reject the 77.7% income tax hike, citing the initiative鈥檚 anticipated loss of to , , and .

If Arizonans aren鈥檛 funding Proposition 208, who is?

National Education Association

The Washington, D.C.-based National Education Association 鈥� 鈥� contributed $6,000,000 in September and an additional $1,750,000 in October, for a total of $7,750,000.

The National Education Association鈥檚 , the Arizona Education Association, has donated a total of $1,147,291.09,

In total, 41 percent of all funding 鈥� nearly $9,000,000 鈥� in favor of Proposition 208 has come from the teachers union and its affiliated groups. 

The union reports in revenue each year.

Stand For Children

Portland, Ore.-based Stand For Children, which had has contributed another $5,153,627.78.

In total, $9,235,202 鈥� 42.75 percent 鈥� of pro-Proposition 208 contributions have come from Stand For Children. 

United Food and Commercial Workers

United Food and Commercial Workers, a union with across the country, donated $50,000 on Sept. 23. 

Most UFCW workers that will be taxed at the , while many small businesses will be taxed at a rate more than 60 percent higher, at . 

Open Society Foundation

The Open Society Foundation, based in Manhattan, on Oct. 14 in favor of Proposition 208 via its Open Society Policy Center. The Open Society Foundation reported $376 million of revenue in 2018, according to its .

Children鈥檚 Action Alliance

The Children鈥檚 Action Alliance donated $80,000 on Feb. 11 and an additional $5,000 on June 2. 

Movement Voter Project

The Movement Voter Project, based in Massachusetts, contributed $50,000 on Oct. 9. The group describes itself as seeking to build  

The group operates a fund, dubbed the 鈥淏ig 5 Battleground Fund,鈥� specifically supporting campaigns in Wisconsin, Michigan, Pennsylvania, Florida and Arizona.

League Of Conservation Voters Education Fund

The League of Conservation Voters, a Washington, D.C.-based group which recently endorsed and her , donated $75,000 on Oct. 14. 

Garcia for Governor

The campaign committee for David Garcia, the 2018 Democratic nominee for Arizona governor, of 鈥渟urplus cash鈥� to the group on Oct. 9. 

Garcia, , lost to Gov. Doug Ducey by a 14 percent margin.

Wealthy out-of-state donors

Two out-of-state billionaires from Oklahoma and California have contributed $2.5 million to the campaign.

Stacy Schusterman of Tulsa, Okla. donated $2,000,000 on Sept. 4. 

Schusterman is an oil and gas executive whose family in 2011.

Arthur Rock, of San Francisco, Calif., donated $500,000 on Sept. 23. 

Rock, who , is a successful Silicon-valley venture capitalist. He is president of The BASIC Fund, which according to , helps low income families 鈥渁fford the cost of tuition at private schools in the Bay Area.鈥�

Rock has also been a major contributor to KIPP, a large national charter school network, and Schusterman serves on the of the Charter School Growth Fund. 

The pro-Proposition 208 campaign coalition includes Save Our Schools, a group hostile to school choice. 

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As CEO of the nonprofit Arizona Small Business Association, Jess Roman is a passionate advocate for small companies and sole proprietors statewide. 

He also is a strong proponent for adequate funding for teachers and schools. Yet, he is calling on voters to reject Proposition 208, the ballot measure known as Invest in Ed. 

His opposition lies in the fact that the measure would have a negative impact on the 鈥渧ast majority鈥� of the organization鈥檚 1,000 members in Arizona, Roman said. 

While the measure is intended to raise money for education by taxing high income earners, voters should not be misled into thinking it will not affect small companies as well, Roman said. 

Roman has a unique understanding of what it takes to grow a business and keep it operating. 

He spent 25 years in commercial banking in Arizona including as the president of BNC National Bank鈥檚 Arizona market. He also held business development positions with Heritage Bank, Desert Hills Bank and First Community Financial.

Roman spoke to 探花精选 about why Prop. 208 is the wrong path for funding education in Arizona.  

As someone who has spent his career helping entrepreneurs grow their businesses, what are some of the daily challenges small companies face?

Businesses can go through different cycles depending on the year. There are so many issues that small businesses face: vendor relationships, challenges with employees, taxes, insurance, liability, human resources, sales, revenues, managing costs and profitability.

In addition to that, politics adds to that weariness. Who鈥檚 going to be elected president? What happens with taxes overall, let alone at the state level? That鈥檚 what they have to deal with on a daily basis.

Now, you throw in the cloud of this initiative. It鈥檚 just one more thing that then becomes out of their control. You work hard to make a profit and now the hands of this initiative are out for more dollars that is singly focused when it should be broader. There should be more shoulders lent to this instead of just a narrow segment of our economy.

You have stated that this is the worst time for an added tax on small businesses because of COVID-19. What are some of the stories you are hearing from your members affected by the pandemic? 

Restaurants and tourism in particular have been severely impacted. And with the holidays coming up, people may be reluctant to go to a restaurant, so that intangible emotion becomes a tangible for restaurant owners. They are being held hostage by the health challenges, which they understand. But it鈥檚 been really tough for them. It takes an emotional toll on everybody. 

Regardless of the industry, most businesses want to model responsible behavior. They鈥檙e buying cleaning supplies and protective equipment. I went to my dentist recently and when I walked in, there were no magazines, the chairs were spread out, there was a brand new wall. Plastics were everywhere in between. They completely redid their office to make patients feel comfortable. This can鈥檛 be inexpensive.

So here small businesses are fighting everyday to survive in this very difficult downturn and now you鈥檝e got this initiative, one more thing out there on the horizon they may have to deal with. It鈥檚 wholly unfair.

Why would the initiative impact the vast majority of your members?

The vast majority of small businesses are not C corporations. They are limited liability companies and sole proprietors who file their taxes on the individual portion of the tax code so they could be subject to the tax increase. 

And you can鈥檛 just flip to a C corporation. It鈥檚 hugely expensive and it just doesn’t make any sense for an LLC to do that in order to manage their taxes. So what we would be doing is taking away from their future growth with this tax. 

What is ASBA鈥檚 stance on education funding? 

The Arizona Small Business Association recognizes the importance of education, and it supported the Red of Ed movement and the 20 percent pay raise by 2020 initiative from Governor Ducey. However, the Invest in Ed initiative puts all the burden squarely on the backs of individuals and small businesses while giving a free pass to corporations.聽

Because small businesses file taxes on the individual portion of the tax code, Proposition 208 will increase taxes by nearly 80 percent and create a huge burden for small businesses who are already struggling in the wake of the COVID-19 pandemic. 

If Proposition 208 passes, it will be the nail in the coffin for many of us. No more hiring, no expansion, no recovery, and less tax dollars for Arizona鈥檚 teachers.

About the Arizona Small Business Association 

The Arizona Small Business Association (ASBA) is the voice for small business in Arizona, dedicated to promoting success for entrepreneurs, the business community and economic growth in the state. ASBA provides resources for businesses of all sizes with fewer than 500 employees, including education and mentoring opportunities, professional connections, and support resources through strategic partners. 

For more information, go to:

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Leaders from chambers of commerce across Arizona came together Monday night in a 鈥渢ele-townhall鈥� conducted via video conference to hear from the campaign to defeat Proposition 208 and from renowned Arizona economist Elliott Pollack.

Pollack, who has served as co-editor of the Arizona and Greater Phoenix Blue Chip economic forecasts published by Arizona State University’s Economic Outlook Center, told the audience that the tax initiative to raise the state鈥檚 top income tax rate by 77.7% would have grave consequences for the state鈥檚 future. 

鈥淔or the first time in the 50 years I鈥檝e been a practicing economist in Arizona, it would do something that would hurt economic development in the short- and long-run,鈥� Pollack said. 鈥淭his is a disaster waiting to happen.鈥� 

If passed, the tax increase initiative would result in Arizona having the country鈥檚 ninth-highest income tax rate, only to be exceeded by economic poor performers like California, New York, and New Jersey, which Pollack said are 鈥渁ll economic disasters. And it鈥檚 not a coincidence they鈥檙e all economic disasters.鈥� 

Pollack says high-tax states give the wrong incentives, shedding people and jobs. 

Terri Kimble, the president and CEO of the Chandler Chamber of Commerce, agreed, saying Proposition 208 sends the wrong message to businesses attempting to recruit new talent to Arizona. She cited attracting top-notch health care and manufacturing professionals as an example. 

鈥淚f Arizona鈥檚 going to continue to lead the healthcare industry and some of the healthcare networks that we have, this is going to be huge,鈥� Kimble said. 鈥淎nd we also see that in the manufacturing sector as well.鈥� 

Kimble said her chamber is especially concerned about the impact on small businesses, which would bear the brunt of the tax increase, a sentiment shared by her counterpart at the Tucson Metro Chamber, Amber Smith.

鈥淩ecovering from COVID-19 and your business trying to survive during this time, here is one more obstacle in trying to survive,鈥� Smith said. 鈥淭hat is really what is most worrisome for these companies is that they are looking at trying to survive next week. How can they survive this for next year?鈥� 

All the speakers at the meeting convened by the Greater Phoenix Chamber and the Arizona Chamber Executives agreed that they view adequate education funding as essential to the state鈥檚 continued economic development, but that Proposition 208 risks far more harm than good.

鈥淭his is not about not funding education,鈥� economist Pollack said. 鈥淭his is about finding the right way to fund education, and this is the wrong way.鈥�

鈥淲e view education as an economic development tool to attract high quality companies here,鈥� Kimble said. 

Smith, the president and CEO of the Tucson Metro Chamber, concurred. 

鈥淥ur 鈥榥o鈥� vote on this is not because we don鈥檛 believe in funding education,鈥� she said. 鈥淚n fact, it鈥檚 because we believe in funding education why we are against this.鈥� Smith said the economic harm that would result from the tax increase would jeopardize the future revenues necessary to fund education. 

Todd Sanders, the president and CEO of the Greater Phoenix Chamber, who served as the meeting host and moderator, asked his counterpart at the Arizona Chamber of Commerce & Industry, Glenn Hamer, to respond to criticism that the business community has failed to support education funding. 

鈥淚t鈥檚 a phony baloney sandwich,鈥� Hamer said, citing the numerous legislative funding initiatives and ballot referrals his and other business groups have supported to increase education funding and improve academic outcomes. 鈥淚t is a false comment to say that the business community hasn鈥檛 supported more dollars into our K-12 system鈥攚e have.鈥�

The chairman of the effort to defeat Proposition 208, Jaime Molera, who also chairs the Greater Phoenix Chamber鈥檚 Education & Workforce Development and Public Affairs committees and served as the state superintendent of public instruction and twice as president of the state Board of Education, said he is heartened by his campaign鈥檚 broad coalition and urged everyone to vote no.

鈥淵ou have just a wide array of Arizona businesses that have come together to say, 鈥楾his is not a reasonable plan for education. It鈥檚 a horrid plan for our education system, but it鈥檚 even worse for our economy.鈥欌��

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During the Red for Ed movement of 2018, many of us joined the thousands of teachers marching on the Capitol for a substantial increase to teacher pay. We believe that protest played a definitive role in convincing the Legislature and governor to adopt a spending plan that included a phased-in average 20% teacher pay raise. That raise was fully implemented by the start of the current school year.  

The pay increase was made possible because of a thriving economy that made such a significant investment possible. 

Many Arizona teachers believe more must be done. Proposition 208 isn鈥檛 the answer, however. Contrary to the claims of the proponents, the initiative is likely to make future funding increases more difficult. 

That鈥檚 because Proposition 208 raises state income taxes by 77.7% on certain earners, including small businesses.  

An expanding small business sector has proven essential to the health of the Arizona economy. In fact, small businesses employ 58% of Arizonans in the private sector. When small businesses do well, education funding does better. 

Dramatically increasing these small businesses鈥� income taxes when they鈥檙e already struggling during the pandemic won鈥檛 deliver the revenues necessary for future education funding increases. 

This segment of tax revenues is highly volatile. During the recession, revenues from these taxpayers plunged more than 30%. Our district school boards won鈥檛 be able to base budgets and our teacher contracts on a source of funds that is so unpredictable. We deserve a reliable salary, not occasional bonuses. 

The initiative also relies on language so broad and so full of loopholes that it offers no guarantees for increased pay for classroom teachers. We value deeply the contributions of every person who works on a school campus, but the Proposition 208 campaign鈥檚 claims that the measure is designed to increase pay for the individuals at the front of the classroom is misleading. 

What鈥檚 especially troubling is that Proposition 208 provides no safeguard to prevent administrators from using this new tax to pay for current teacher pay, only to redirect the dollars presently devoted to teacher pay to some other purpose not related to student instruction. 

In fact, the entire proposition gives students short shrift. We believe that teachers are indispensable participants in kids鈥� lives. We鈥檝e made it our life鈥檚 work to deliver a world-class education to all students to shape today鈥檚 young people into tomorrow鈥檚 leaders.  

But Proposition 208 says nothing about students. Nothing about academic achievement or educational outcomes. There鈥檚 not a word about core competencies like reading or math attainment, nothing about college readiness. It鈥檚 as if the authors of Proposition 208 forgot to include the education portion of their campaign slogan in their initiative.  

We know that taxpaying small businesses are responsible for much of the tax dollars that shape state education budgets. Teachers and small businesses must work together to find sustainable funding sources for our classroom teachers and, more importantly, for our students. Passing the largest permanent tax increase in Arizona history on the backs of small businesses during such a vulnerable time is not the right approach.  

We shouldn鈥檛 have to choose between a strong economy and better education funding. But without a strong economy, we鈥檒l never achieve better education funding.  

We urge you to join us in voting NO on Proposition208.  

Catherine Barrett 

Karen Deadrick 

Araceli Flores (former teacher) 

Brenda Garcia (former educator) 

Abby Gibson 

Jacqueline Gutierrez (former teacher) 

Melissa Hagen 

Tracie Happel (former teacher) 

Dave Kahn 

Amanda Marquez 

Lucy Martinez 

Katherine Visser (former teacher) 

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A that analyzes the economic impact of Proposition 208 in Arizona shows it will likely place Arizona 8th or 9th in the nation for the highest income tax rates. Negative unintended聽consequences will likely follow, two nationally renowned economists said Tuesday.聽聽

The ballot initiative is intended to tax the state鈥檚 highest earners, but those at the bottom of the income scale would suffer most, said Stephen Moore, an American author and television commentator on economic issues, who released the report during a press conference hosted by the Arizona Chamber of Commerce and Industry. 

鈥淚t鈥檚 not the rich people that are going to be hurt. The rich can pay higher taxes or they can go somewhere else. It鈥檚 really the people at the bottom who will lose jobs,鈥� Moore said. 鈥淎bout half the impact of this tax will be paid not by big corporations and not, you know, the very, very wealthy, but will be paid by the small business owners. 

Moore and fellow economist and researcher Dr. Arthur Laffer conducted an analysis of how tax rates have affected states over the past 30 years for the report, 鈥淎rizona鈥檚 Proposition 208 Loses Jobs and Harms Small Businesses.鈥� 

What they found is that almost all states with lower income tax rates perform better than higher income tax rate states in most economic indicators. 

Initiative would almost double top tax rate

Proponents of the measure, also known as Invest in Ed, want to tax high income earners to provide funding for K-12 education. 

Under the initiative, Arizona鈥檚 top income tax rate would be raised from 4.5 to 8 percent 鈥� almost an 80 percent increase for individuals who earn $250,000 and joint filers who earn $500,000.  

Couldn鈥檛 come at a worse time for small business

The tax increase would come at a time that could further devastate a large number of small businesses that may be affected by the new tax, said Laffer, who is known as the “Father of Supply-side Economics” for inspiring a world-wide tax-cutting movement in the 1980s. 

Those most at risk are small businesses still struggling to keep their doors open during the pandemic. 

Simply put, Arizona would move from having the 13th lowest income tax rate on small businesses to the 8th or 9th highest in the nation, Laffer said. 

Raising taxes when the nation is trying to recover from the COVID-19 is 鈥渋nappropriate and foolish,鈥� Laffer said. 

Almost all states with lower tax rates perform better

Such a drastic increase would dampen investment and growth, and research backs that up, they said. 

In conducting their research, the economists examined how similar types of tax increases over the past 30 years have affected states. Almost all states with low or zero income tax rates performed better in most economic indicators than those states with high tax rates, they found. 

High tax states saw less revenue for government responsibilities, including education, Laffer said. 

An analysis of the 11 states that introduced income taxes since the 1960s shows they are at the 鈥渧ery bottom of performance鈥� in not only economic and population growth, but revenue for public services, Laffer said. 

Harsh implications for Arizona

Using data from other states, the economists measured the impact Arizona鈥檚 Proposition 208 would likely have on jobs, wages, interstate migration, tax revenue collections, state competitiveness, and small businesses.

They found that all areas would likely suffer, making 鈥淎rizona residents poorer and the state鈥檚 economy less competitive.鈥� 

Among their findings:

鈥n estimated 200,000 jobs and about $25.5 billion in personal income would be lost over the  next 10 years. 

鈥� Fifty percent of the tax would be borne by small business owners and operators that typically generate from half to two-thirds of the jobs in a state.  

鈥� Arizona鈥檚 economic competitive position among the 50 states would fall from No. 10 to No. 16, according to the ALEC-Laffer competitiveness index.

鈥he state would lose 700,000 people in net instate migration over just the next decade.

鈥age growth would decline in the state and after a decade average household income would be roughly $6,000 lower with the tax hike. 

鈥 loss of businesses, jobs and taxes from in-migration would reduce by half the proponents estimate of $1 billion in tax revenue gains 

鈥淭he preponderance of the evidence shows a negative effect when states raise income taxes,鈥� Laffer said. 鈥淭hat鈥檚 because we鈥檙e a country where people can move across borders. We鈥檙e a very mobile population. Businesses, corporations and financial capital can move across borders and they do.

鈥淭hey move to places where they have the best pro-growth and pro-business atmosphere.鈥�

About Stephen Moore

Stephen Moore is FreedomWorks’ chairman of the Task Force on Economic Revival. He previously served as president of the Club for Growth, chief economist of the Heritage Foundation, and as a member of the Wall Street Journal editorial board.

About Arthur Laffer

Arthur Laffer is the founder and chairman of Laffer Associates, an institutional economic research and consulting firm, as well as Laffer Investments, an institutional investment management firm utilizing diverse investment strategies. Dr. Laffer’s economic acumen and influence in triggering a world-wide tax-cutting movement in the 1980s have earned him the distinction in many publications as “The Father of Supply- Side Economics.”

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Arizona, like the nation as a whole, is experiencing an uneven recovery from the initial economic impacts of the pandemic. What that means is that some sectors of the economy have rebounded sharply, while others remain in freefall.

At this critical moment, pro-growth policies can help businesses recover and help get the unemployed back to work, but bad policy risks further decimating businesses and jobs. Arizona鈥檚 Proposition 208 is perhaps the most misguided policy on the ballot鈥攊n any state鈥攖his November.  

Small businesses are a critical source of jobs and a vital part of our economic ecosystem, serving as both suppliers and customers to larger organizations. In Arizona, small businesses employ  of Arizonans in the private sector. In certain sectors, small businesses have an even larger footprint. For example, small firms employ 82 percent of all Arizonans in the construction industry and 62 percent in real estate. They also employ 56 percent of those in food services and accommodation and over 50 percent in professional and business services.  

Some of those , particularly those that rely on customers gathering in-person, have yet to rebound from the pandemic-induced recession. One in five jobs in the accommodation and food services sector that existed in February, for example, are gone today. Moreover, nearly 30,000 professional and business services jobs have disappeared. For Arizona to recover, these small businesses must recover. 

At the same time, we need the small business employers that are doing well to continue growing. Earlier this year, Arizona was  fifth in the U.S. for small business employment growth. It is easy to see why when you consider that sectors like construction increased their employment by nearly 40 percent over the last five years.  

But Arizona鈥檚 pro-business environment, and the ability of these small businesses to recover and continue to grow, would be fundamentally threatened if Proposition 208 is passed.   

Proposition 208 would increase tax rates on small business that pay taxes through the personal income tax by an astonishing 78 percent. Proponents  that this will generate nearly $1 billion a year in new taxes to fund schools. But that money has to come from somewhere, and it is most likely going to mean less business investment and fewer new jobs. One conservative  places the job loss at 124,000. And let鈥檚 not forget, fewer Arizonans working means fewer paying normal income and sales taxes,  the state and local governments an estimated nearly $2.5 billion over the next decade. 

Even these stark estimates may not tell the full story. Over the past decade, Arizona鈥檚 strong economy and quality of life has  more than 2 million Americans who moved so that they could call Arizona home. Many came from states that punished small business owners with high tax rates. If Proposition 208 passes, Arizona will move from being a low-tax state to having one of the top-ten-highest tax rates in the nation, alongside the likes of California and New York. Passing Proposition 208 would be the equivalent of rolling up the proverbial welcome mat and closing the door on small business owners.

Proponents of Proposition 208 claim that these tax increases are necessary to ensure a quality education for Arizona students. But that is not true either. Since 2015, Arizona has invested an additional  in K-12 education. Teachers鈥� salaries have increased by an .  

Since 2000, Arizona has made considerable progress in  the number of students who are at or above proficiency in math and reading. There is more work to be done, but it will take smart targeted investments that help improve our school system and our economy.  

Proposition 208 isn鈥檛 smart or targeted, it will hurt Arizona鈥檚 economy and cost the state jobs when we need new job creation the most. It deserves to be defeated.  

Suzanne P. Clark is the president of the U.S. Chamber of Commerce. Glenn Hamer is president and CEO of the Arizona Chamber of Commerce and Industry. 

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A recurring theme of the campaign in favor of Proposition 208 is to change the definitions of key terms of the debate in order to fit the proponents’ narrative. The problem? Arizonans won鈥檛 fall for it.  

This week you may have seen evidence of the evolving strategy from the Prop. 208 proponents, which is to tell small business owners that they鈥檙e really not small businesses. This isn鈥檛 new. Last week proponents tried to weave the narrative that no small business owners would be subject to the initiative鈥檚 77.7% tax increase, .  

Why are the proponents trying so hard to change the definition of small business? My guess 鈥� passing the largest tax increase in Arizona history during a global pandemic is likely to be rejected by voters, and we already know it does not sit well with our small business owners.  

It鈥檚 why the 鈥檚 leading small business associations and dozens of other business organizations representing everyone from farmers to Realtors oppose Proposition 208. And telling these small business owners they are not in fact small business is just insulting, especially considering all that these job creators do for our state’s economy. 

Arizona small businesses employ 1.1 million Arizonans across all industries, amounting to 44% of our private workforce. In 2019 alone small businesses created over 44,000 net new jobs. They are the backbone of our economy and it is imperative that they succeed. Raising taxes on small businesses and subjecting them to tax rates higher than large corporations is no way to help.   

But this isn鈥檛 the first time the proponents have changed the definitions to fit their narrative, and small businesses aren鈥檛 their only target; they have their sights set on educators, as well. K-12 advocates have long asked for sustainable revenue sources to provide base funding for the classroom and for our teachers. . 208 does not deliver.  

The proponents will tell you that 50% will go into base teacher pay. The problem? They have once again altered and diluted the definition of teacher to include swaths of non-administrative support personnel, meaning less money for our traditional classroom teachers.  

The other omission? They are nearly doubling the tax rate on the most volatile segment of tax revenues, leaving no guarantees for funding from year to year. That鈥檚 no guarantee for our teachers, for the classroom, and most importantly for our students.  

Changing definitions to fit their narrative is a neat trick, but this bait and switch definition strategy won鈥檛 fool Arizona voters and definitely not small businesses. They are well aware that regardless of what the proponents say, Proposition 208 wallops small business and would cause incredible damage at the most vulnerable time.聽聽

Courtney Coolidge is vice president of government affairs for the Arizona Chamber of Commerce & Industry

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Arizona, the nation and the world are starting to see some economic recovery on the tails of a global recession caused by the COVID-19 pandemic.  

Now, keeping that momentum going will rely on two major factors, including the willingness for governments to lend a helping hand to those who need it most, top economic experts said Wednesday during the s annual Economic Outlook 2021 sponsored by Cox Communications. 

The other major factor is how well countries can keep the virus in check, said presenters Elliott Pollack, CEO of Elliott D. Pollack and Company; Matt Stephani, president of Cavanal Hill Investment Management, and Scott Horsley, chief economics correspondent for NPR.

All three spoke about the impact of the virus and what lies ahead for the Phoenix region, the nation and the world. 

Here are some of the key takeaways:

New round of relief is essential for the 鈥渉ave nots鈥�  

The U.S. has had more coronavirus cases per capita than most other countries, but it has been able to weather much of the financial toll because of the federal CARES Act passed in March. 

Through the Act, Congress has provided $3.1 trillion in relief for businesses and individuals, which has carried both the 鈥渉aves and the have nots鈥� throught the financial turmoil, economist Pollack said. 

But recent gridlock on a new round of relief could upend life for the 鈥渉ave nots,鈥� placing them in a position where they are unable to pay monthly bills, he said. 

鈥淐ongress, the House and the Senate, have let politics get in the way of the need of the public and they have essentially muted the benefit from the $3.1 trillion.鈥� 

He and Stephani both worry that Congress likely won鈥檛 act until after the election. 

Virus makes forecasting difficult 

The other major factor in recovery is the virus itself, the experts said. 

鈥淚n just a matter of months, the coronavirus has spread to every corner of the globe and almost everywhere economic contraction has followed in its wake,鈥� Horsely said. 鈥淭his is the first time in 150 years so much of the planet has suffered a recession at virtually the same time.鈥�

Countries like China, which has taken 鈥渄raconian鈥� steps to shut down society to keep the virus at bay, are seeing stronger recovery. China鈥檚 movie box office sales, for example, are now almost to where they were pre-pandemic, Horsely said.

But others like Mexico and India that are seeing surges in cases do not have the resources or the willingness to provide stimulus relief. Their future is less certain. 

Personal savings to jump start recovery 

Stephani, who spoke from a national perspective, was optimistic about a fairly quick recovery for the U.S. over the next year and a half.

Americans have piled up record levels of personal savings and money market assets under stay-at-home orders, he said. The nation鈥檚 personal savings rate is averaging about 24 percent. Coming into the pandemic, the rate was only around 6 to 7 percent. 

In dollar terms, bank deposits are up $2 trillion from pre-COVID levels, Stephani said. Money market assets have risen from $3 trillion to $4.5 trillion.

If a vaccine or effective treatment arrives within the next year, consumer activity should explode with all that available cash. 

鈥淭hat is dry powder that is going to come into the economy and when it does, it will move the economic needle,鈥� Stephani said. 

Phoenix metro fastest growing major market 

Meanwhile, the outlook for the Phoenix region is very promising, Pollack said.

For the most part, the recovery of jobs in metro Phoenix has been 鈥渕iraculous,鈥� he said. Phoenix has recovered more than half the jobs lost when due to the pandemic. 

鈥淲hile the United States was losing 98 percent of all jobs created between the last recession and February, greater Phoenix only lost 41 percent,鈥� he said.

Many factors are responsible for the region鈥檚 healthier outlook, including federal relief from the CARES Act, a thriving economy prior to COVID-19, and Arizona citizens who have been masking up and social distancing to reduce the spread of the virus.  

Millennials and people over 65 will be buying homes 

Moving forward, most industries in the Phoenix region should see full recovery over the next two years. 

Housing will continue to be one of the strongest sectors, in part due to the virus, Pollack said. 

COVID-19 is causing people to want to leave high rents in small apartments in big cities to buy homes in more affordable locations like Arizona. 

Demographics will also benefit the Valley and the state as the two largest population groups, millennials and people over 65, seek to purchase houses over the next decade. 

Prospects for tourism, hospitality, restaurants 

Industries that have been hardest hit, meanwhile, will come back in force once  Americans can fully participate in the economy again, the experts said. 

Prop. 208 tax hike biggest threat to growth

One potential drawback for recovery would be passage of Proposition 208 in Arizona in the upcoming election, Pollack said.

Known as the 鈥淚nvest in Ed鈥� initiative, it would put the state in the top-10 of the highest income tax states in the nation. Under the initiative, Arizona鈥檚 top income tax rate would be raised from 4.5 to 8 percent 鈥� almost an 80 percent increase. 

In addition to deterring economic development here, thousands of small businesses that file their taxes under the individual tax code would be impacted. Many might not survive.  

鈥淚鈥檓 not saying education doesn鈥檛 need more money; I鈥檓 saying, this isn’t the way to do it. Besides the inequity, you鈥檙e going to hurt economic development,鈥� Pollack said. 鈥淲e would go from the 15th lowest marginal personal income tax rate in the country to the ninth highest.

鈥淚t’s something that would come back to bite us.鈥�

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