Proposition 126 is cunningly titled “The Protect Arizona Taxpayers Act.” Whether it would actually protect taxpayers is subject to debate.
If voters approved this constitutional amendment, an entire category of taxes would be removed from the potential revenue sources by which the state and local governments support a variety of public needs. That category is taxes on “services” – a term not defined in the ballot measure or elsewhere in law. With few exceptions (utilities, lodging, telecommunications), Arizona does not tax services. Thus, it is unknown how a prohibition of service taxes might affect any governmental entity’s ability to carry out its responsibilities. The prohibition would apply to any new or increase of any existing transaction-based fee, assessment, or tax on any service performed in Arizona.
One of the means by which governments develop and implement fiscal and monetary policies is the levy of taxes. The United Methodist Church’s Social Principles address the responsibilities of governments with respect to fiscal matters:
We claim all economic systems to be under the judgment of God no less than other facets of the created order. Therefore, we recognize the responsibility of governments to develop and implement sound fiscal and monetary policies that provide for the economic life of individual and corporate entities and that ensure full employment and adequate incomes with a minimum of inflation. … We support measures that would reduce the concentration of wealth in the hands of a few. We further support efforts to revise tax structures and to eliminate governmental support programs that now benefit the wealthy at the expense of other persons. (Social Principles ¶163.IV. The Economic Community)
Proposition 126 presents a solution in search of a problem. Supporters suggest it would protect low- and moderate-income and elderly persons from the worry that taxes might be imposed on things such as child care, haircuts, dry cleaning, car repairs, and funerals. No such taxes have been proposed. Arizona now depends on taxes on the sale of goods to a greater extent than most other states. Those taxes, too, are regressive and have a greater impact on persons in lower income categories. Isn’t it strange that people seem willing to tax a transaction by which a poor mother acquires clothing for her children, but we are being asked to rule out even the possibility of ever taxing services for which wealthy people spend their money?
Arizona law already exempts many products (but not clothing) from taxation. Each new exemption means less money in the general fund for education and other vital services. A constitutional prohibition on taxation of any services would make a restructure of state or local tax policy more difficult and could lead to even greater reliance on sales taxes. Funding for the proposition comes mainly from real estate groups. Voters should question whether the sponsors’ concern is for struggling taxpayers or the interests of the real estate industry.
Armed with information, whatever you decide, please remember to vote this November.