Overwhelming Evidence: Prop 208 & Economy

Elections | 10/23/2020

Overwhelming Evidence: Prop 208 is Good for the Economy 

For years now, the Arizona legislature has failed to sufficiently invest in education. Our state ranks 50th in funding per student, while our teacher-student ratios are some of the highest in the country and our public teacher salaries among the lowest. These failures to invest in our children, their teachers, and their schools hurt Arizona’s economy.  

Opponents of Prop 208 - Invest in Ed have claimed that the initiative would hurt small businesses in Arizona and slow job creation, but the truth is the vast majority of Arizona business owners would not face any tax increase under the initiative. Further, investments in public education and the public sector are themselves important for creating a healthy economy that allows all residents to thrive.  

Arizona’s teacher shortage crisis persists, according to a September 2020 report released by the Arizona School Personnel Administrators Association. Arizona is in its sixth consecutive year of a teacher shortage. The data indicates about 28% of teacher vacancies across the state this year remain unfilled while half of the vacancies are filled by teachers who do not meet the state’s standard certification requirements. 

The Solution – Prop 208  

Prop 208 - Invest in Ed levies an additional 3.5% income tax surcharge for Arizona taxpayers with taxable income over $250,000 (or over $500,000 for taxpayers who are filing joint returns). The tax collected from this surcharge provides much-needed investments in Arizona’s K-12 education system.  

Prop 208  

  • Restores K-12 education funding. Hundreds of millions of dollars annually.  
  • Ensures accountability. By law, these dollars must be spent where they’re needed most – on teachers, counselors, aides, support services and career and technical education.  
  • Assesses a small income-tax surcharge on only the highest, 1% of earners. The remaining 99% of Arizona taxpayers won’t pay a cent more.  
  • 99.9% of Prop 208 funds directly support schools and classrooms 

We Must Invest NOW in Arizona’s Future 

Arizona’s teacher shortage crisis was caused by a decade of funding cuts to education, while the wealthy got state and federal tax breaks. In a recent economic impact report, Economist Dan Hunting of Arizona Policy Analysis LLC, shows the overwhelming impacts of Arizona’s cuts to education funding:  

  • Arizona’s education funding lags behind the rest of the country and the gap is widening  
  • Arizonans were directing less of their income to education funding in 2018 than they were in 2007.  
  • Administrative expenses for K-12 education in the state are the lowest in the nation.  
  • Increases in education funding are positively correlated with increases in total personal income  
  • There appears to be little evidence for the contention that high-tax cities are losing population to low-tax municipalities. 

Economists and Tax Experts Agree: Prop 208 is Good for Arizona’s Economy 

The Invest in Ed coalition did a lot of research on the most viable, fair, and substantial manner to invest in Arizona’s schools. We worked with many tax experts, economists, and business leaders to find a solution. Here are some key points they shared with us: 

“...the so called ‘recession era’ drastic cuts to public-school funding occurred while Arizona’s economy was on the rise.… State policy on public school funding over the last 10 years has resulted in a net cost to Arizona’s economy.” 

 Dr. Enrique Lopez-Lira, Founder & Principal of Phoenix Economics 

Read Lopezlira’s full report here.


“The vast majority of business owners taxed on this pass-through basis will also not experience any tax increase due to Prop 208 - Invest in Ed because most small business owners make less than $250,000 a year (or $500,000 a year for those filing a joint return). In 2018, less than 13% of Arizona’s individual tax returns reporting partnership or business income had more than $200,000 in adjusted gross income. And only about 3% of Arizona tax returns reporting business or partnership income had adjusted gross income of $500,000 or more. Prop 208 - The Invest in Education Act makes an investment in Arizona’s future, our children. The Act asks those who have benefited the most from our growing economy to pay their share to ensure our future prosperity. Now is the right time to make that investment.”  

Tax Law Professor Erin Adele Scharff 


Read her Erin Scharff’s full report here.



“Cities with high tax burdens simply did not lose high-income families, either in absolute numbers or as a percentage of the whole.” Dan Hunting Economic Analyst, Arizona Policy Analysis LLC 

Read Hunting’s full report here.



“...the decision to raise top state income tax rates should be an easy one. With state revenues down sharply and top earners weathering the pandemic far better than most, raising tax rates on people managing to earn high incomes during these tumultuous times is an obvious policy response.... Of course, the pursuit of increased tax rates for high-income people is being met with a vocal, organized opposition. The most common objection comes for a decades-old supply-side economics playbook. It claims that higher taxes for the rich will slow state economic growth – a finding not supported by the academic literature and in direct contradiction to the real-world experience of states that have chosen to enact higher rates.”  

Carl Davis, Institute of Taxation and Economic Policy 

Read the full article: "Another Reason to Tax the Rich? States with High Top Tax Rates Doing as Well, if Not Better, than States Without Income Taxes"


"States, cities, and school districts must require their wealthiest residents to pay higher taxes right now.” - Joseph E. Stiglitz, Nobel Prize-winning Economist 

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