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Arizonans To Vote On The “Protect Arizona Taxpayers Act”

By Anthony SanFilippo
October 2018

Update (Nov. 7, 2018): Voters in Arizona decided to pass Proposition 126 by a margin of 65-35, which was a decisive victory. Stand by for more updates on what this will mean to your community. Sign up for updates.

There are currently no taxes on services in Arizona. Voters have the option in November to make sure it stays that way – permanently.

Service taxes are taxes levied by the government on service providers on certain service transactions but is actually borne by the customers.

Proposition 126 would create the Protect Arizona Taxpayers Act. If approved by the electorate, the Act will amend the Arizona Constitution to protect taxpayers from state and local governments imposing any new sales tax or use tax on services.

The legislature has had the right to do that for many years now and hasn’t acted on it, but some trends from around the country are starting to give some folks pause as to what could be coming just around the bend for Arizonans if it’s not passed.

North Carolina, for example, recently expanded its sales-tax base by adding a tax on a variety of maintenance, installation and repair services. In Kentucky, services such as auto repairs, fitness classes, limousine rentals and even pet grooming had new taxes thrust on them in 2018. Oklahoma and Washington also added taxes on some of their services and Illinois has begun discussing this in their most recent legislative session.

The Protect Arizona Taxpayers Act is designed to prohibit state lawmakers from implementing a new sales tax on services that Arizonans use every day.

While it is true that taxes on services would require a vote of two-thirds of the legislature – meaning there would at least need to be some bi-partisan support – lawmakers could cut deals to add extra taxes on everyday items that would hit the pocketbooks of residents in the state, especially middle-income residents and families.

Also, that two-thirds vote requirement, is no longer needed if the legislature were to simultaneously reduce taxes elsewhere in equivalent dollar amounts.

Here are some examples of services that could be taxed in Arizona beginning as soon as 2019 if Proposition 126 fails:

  • Health care services – including services from primary-care physicians, surgeons, physical therapists, dentists, optometrists and even mental health providers.
  • Family services such as childcare, tutoring and self-defense classes.
  • Home services like lawn care and landscaping, new construction, plumbing needs, installations and repairs such as heating and air conditioning and appraisals and inspections.
  • Professional services that could add taxes to banking needs, accounting services, advertising for local businesses and real estate transactions.
  • Personal services that are considered part of a person’s day-to-day needs like haircuts and manicures, auto repairs and dry cleaning. Even life altering decisions – like permanent tattoos or funding the funeral of a loved one would be considered fair game.

Sales taxes hurt low-and middle-income families more than anyone else. Proposition 126 aims at protecting those who are least able to afford new taxes, like senior citizens, the disabled and others on fixed incomes.

Additionally, this could serve as a double tax on small business owners. They are already taxed via the state income tax. Without protection of taxes against services, they could then be hit a second time by paying an additional tax for the same labor.

Opponents to Proposition 126 will say that the legislature hasn’t taxed services yet, so a pre-emptive strike when an emergency might come up down the road might not be as beneficial to Arizona as one would think. However, a new sales tax on services was recently proposed in the Arizona Legislature, and it wasn’t an emergency situation, meaning that if it can be proposed, it can happen, emergency or not.

Interestingly, in the gubernatorial race in Arizona, both major party candidates oppose Proposition 126. As do a collection of bipartisan lawmakers.

However, Arizona voters don’t seem to agree with the candidates or their elected officials.

The Arizona Republic partnered with Suffolk University in Massachusetts to conduct a poll in Arizona regarding Proposition 126. That poll showed that 48 percent of the voters would support Proposition 126 and prevent a tax on services, while 31.4 percent did not support the measure. The remaining 20.6 percent were undecided.

The poll included 500 likely registered voters and was taken by live telephone operators.

It will be quite interesting to see how this plays out in November because it seems lawmakers and voters might not be on the same page.


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