A few final thoughts on Proposition 208 with Election Day just a few days away:

The wrong top 10

If Proposition 208 passes, the state will join a top-10 list on which no state wants to appear.

We’ll end up on the list of states with the highest income tax rates nationwide. Our contemporaries will include the likes of California, New York and New Jersey.

As numerous economists and commentators have pointed out, high-tax states tend to underperform economically, sometimes dramatically so.

A recent by economists Dr. Art Laffer, Stephen Moore and Erwin Antoni compared the economic health of seven states with no income tax against the nine states with the highest income tax rates:

Over the past decade, these seven states have outperformed the nine states with the highest marginal income tax rates, as well as the nation as a whole, in population growth, employment growth, personal income growth and GSP growth. If passed, Arizona would replace Delaware as the ninth highest income tax rate state in America.

In other words, it would join the category of the loser states, not the gaining states.

The proponents of Proposition 208 are attempting to turn a half-century of economic history on its head.

Neighborhood leaders and laggards

The move to the top-10-highest list would make Arizona economically uncompetitive regionally and nationally.

It’s in our own neighborhood where we’d stick out like a sore thumb. Our neighbors Utah, Colorado and New Mexico all have top income tax rates under 5%, but our current 4.5% rate is the lowest. Nevada doesn’t have a state income tax. If Proposition 208 passes we’d rocket up to a top rate of 8%.

Arizona has been in the pole position to attract jobs fleeing California, a state with a top income tax of more than 13%.

As Laffer, Moore and Antoni write, “According to the IRS, since the 1992 tax year (conveniently in the midst of Arizona’s tax cutting spree), Arizona has gained over 201,000 tax returns and almost $12 billion in adjusted gross income (AGI) from California alone.”

If we erase our competitive advantage, it will be far too easy for job creators to pass over Arizona for another friendlier locale.

We’ve got the best house on the block right now. Let’s not trash the place with the largest tax increase in Arizona history.

An accelerant, or sand in the gears?

Arizona’s economy is in the pandemic than most states in the country. Arizona’s labor force is , but we’re still down about 125,000 jobs.

All of our energy should be on ensuring our policies are properly calibrated to win back every single one of those jobs. Proposition 208 does exactly the opposite.

I had the chance recently to with the American Enterprise Institute’s Dr. Michael Strain, one of the most thoughtful minds in fiscal policy today, who discussed how states like Arizona should be approaching their economic policy during this pandemic-induced downturn.

“If you are a state government, if you are the federal government, now is the time to be doing everything you can to support existing businesses, to encourage new businesses to start, to support consumer spending,” Dr. Strain said. “State governments should be doing everything they can do to avoid countercyclical policies, to avoid raising taxes and making it harder for businesses at a time when the economy is weak.”

Proposition 208 ignores that prescription by taking the capital that supports private enterprise out of the private sector, which only prolongs our recovery and exacerbates the struggles of so many small businesses.

No reforms, no results

Also joining my conversation with Dr. Strain was Dr. Rick Hess, AEI’s director of education policy studies. He’s an all-star in the K-12 education reform movement. Count him as a skeptic that Proposition 208, which doesn’t call for any improvement in academic outcomes or educational attainment, will result in a better education for Arizona’s K-12 students. The record of states that spend more on education and simply hope for the best isn’t a good one, he says.

“Can more money help? Of course it can,” Dr. Hess said. “Would I be confident that a big increase in state spending was going to make a big difference for kids with no other attention to reform or improvement? I’d be hugely skeptical.”

Dr. Hess also doesn’t buy the argument proffered by the proponents that Proposition 208 will help solve the teacher shortage.

“That suggests that the opportunity here is part of the initiative would be creating new pathways in the teaching profession, where folks work a 12-month year, are paid like 12-month professionals, rather than simply putting a lot of resources into districts and hoping they get spent,” Hess said.

In case you were wondering, no such new thinking on attracting new entrants to the teaching profession is included in Proposition 208.

“If you’re talking about a package of reforms, thinking differently about teacher retirement benefits and health care, you’re talking about staffing differently, you’re talking about holding schools responsible for serving kids well, then I am wide open to the argument that we ought to be increasing investment in schools,” Hess said. “But the idea that we ought to just be throwing a lot of dollars and saying, ‘Boy, we hope these get spent differently than the money that’s gone before,’ I tend to be real unenthusiastic about that approach.”

Like everything else about Proposition 208, there is no new thinking, there are no new reforms, and there is no increased accountability for outcomes.

Taxpayers, teachers and students all deserve more than Proposition 208’s empty promises. It’s terrible policy with even worse timing.

Glenn Hamer is president and CEO of the Arizona Chamber of Commerce and Industry. 

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This op-ed was originally published in the Arizona Republic on 4/28/2020 .

Gov. Doug Ducey’s decision to let on May 1 is an important step on the path to reopening big portions of the Arizona economy from its coronavirus-induced coma.

The state’s business community, which is comprised of innovative, creative thinkers who are leading enterprises large and small, is ready to work with public health officials to adopt policies and procedures that will allow for an even broader reopening of the Arizona economy, safely.

On an April 16 conference call with business leaders, the governor solicited ideas for the reopening. The Arizona Chamber of Commerce & Industry, along with more than 150 other entities, have since provided input.

The governor wisely makes clear that he’ll rely on CDC protocols and Arizona public health data to drive decision-making.

Data such as the number of hospitalizations, new cases, available ICU beds and ventilators are the key benchmarks. The rapid scale-up of diagnostic and contact tracing and antibody testing is critical to our efforts to contain the virus and reopen greater swaths of the economy.

1.  Businesses need flexibility

Flexibility is key. Not all employers are the same, so not all guidelines for a reopening should be the same.

Certain types of small businesses might rarely have large numbers of people congregating in one place and can reopen soon, while businesses that engage in face-to-face customer interactions will need to implement appointment-based transactions to limit foot traffic, or can alter their hours to limit interactions throughout the workday.

Industries in close-contact fields like cosmetology, which already must meet rigorous public health standards, will need to develop options to serve their customers in new ways, increasing sanitization measures and utilizing personal protective equipment to protect employees and customers.

Sectors that have been walloped by the pandemic are pivoting to serve a new type of customer.  and first responders a place for some needed rest without the worry of exposing loved ones to the virus at home. As contact tracing programs grow, hotels can host those who need to be quarantined, too.

Meanwhile, businesses that have shifted their workforces to telework should continue those arrangements for the foreseeable future, particularly for workers most at risk.

As certain essential service providers like grocery stores and restaurants delivering takeout have already demonstrated, businesses can be counted on to be nimble, meeting customer needs while still adhering to CDC guidelines. Government should be nimble, too, relying first on industry best practices before rigid mandates.  

2.  Businesses need protection

Liquidity is key. Businesses need every dime right now to keep their operations afloat, so, where possible, governments should delay things like sales tax remittances and property tax payments, and eliminate penalties for businesses that need forbearance. Our congressional delegation must ensure that financial lifeboats like the Paycheck Protection Program have adequate funding.

We should also reduce job creators’ exposure to legal liability.

Governor Ducey took the right approach through an executive order in  to Arizona’s health care workers and medical facilities on the frontlines of combating COVID-19.

Similar protections should be extended to businesses that take all proper steps in accordance with state and federal guidelines to stop the transmission of the virus among employees and customers.

If employers are hesitant to reopen out of fear of inviting a potential lawsuit, then Arizona’s economic recovery will be delayed.

The governor and his entire team throughout this ordeal have demonstrated that prudence does not have to mean paralysis.

It may not feel like it, but a majority of the economy has remained open as we have slowed the spread of the disease. The governor’s declaration of essential services and activities was among the most comprehensive in the country and became a national model, ensuring continuity in sectors as varied as manufacturing to telecommunications to construction.

We are confident that Arizona will exit this pandemic how we entered it: with the nation’s strongest economy.

Glenn Hamer is president and CEO of the Arizona Chamber of Commerce and Industry. Twitter: .

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