Sean McCarthy of the Arizona Tax Research Association is undoubtedly correct that Proposition 208’s additional teacher compensation is highly unlikely to be channeled into base pay.
ATRA in the News
"There’s no other state in the union that takes the most volatile tax bracket, and says we're going to dedicate this portion of it to K-12." said Sean McCarthy, a senior research analyst for the Arizona Tax Research Association, a watchdog group that advocates for efficient government fiscal policy.
“This isn’t complicated. This is basic tax policy 101,” McCarthy said. “Arizona corporations are subject to a 4.9% corporate income tax rate. Small businesses, including S corps, limited liability companies (LLCs), partnerships, and sole proprietorships, are pass-through entities and pay taxes on the individual income tax code. Proposition 208 proposes to raise the top individual income tax rate to 8%, which means some small businesses owners will pay a higher tax rate than large corporations.”
Research papers from the Goldwater Institute and the Arizona Tax Research Association have zeroed in on the extent to which Arizona small businesses get walloped by Proposition 208’s tax increase.