Arizona residents got a bitter civics lesson last summer. They learned just how far politicians, bureaucrats, corporate lobbyists, and union leaders will go to maintain a status quo that serves them well.
Working on drug policy reform initiatives in 1996 and 1998, I got to know some talented and politically savvy people who shared my opposition to the income tax. We all believed that significant tax reform was no longer possible through normal legislative means because the influence of special interests had led to what journalist Jonathan Rauch aptly calls "demosclerosis." From this core group of activists arose the Taxpayer Protection Alliance, chaired by former Arizona Secretary of State Richard D. Mahoney, now a professor at the American Graduate School of International Management. I ultimately served as the group's treasurer. (Full disclosure: I am also a donor to the Reason Foundation, which publishes REASON.)
In the fall of 1999, the alliance began a campaign to put a voter initiative known as the Taxpayer Protection Act on the November 2000 ballot. The initiative would have phased out all personal and corporate income taxes in Arizona over four years, required voter approval of any tax increases the legislature passed to replace the lost revenue, and allowed candidates for federal office to disclose on ballots their position on repealing the federal income tax.
Even apart from its radical particulars, the Taxpayer Protection Act was striking because of its bipartisan backing and popularity. Mahoney, the chairman, is a self-described Kennedy Democrat. Arizona Treasurer Carol Springer, one of the few elected officials to publicly support the measure, is a proud Reagan Republican. As of June, the Taxpayer Protection Alliance had raised some $300,000, about half coming from Arizona residents. An October 1999 poll conducted by the respected national firm Fairbanks, Maslin, and Maulin showed nearly 2-to-1 support, even when respondents were told that income tax receipts account for nearly half of the state's annual revenue of about $6 billion.
As we started gathering the signatures required to make the ballot, we found ourselves opposed by almost every member of what might be called Arizona's ruling class: politicians, businesspeople, bureaucrats, lobbyists, and union leaders who either rely directly on tax money for income or who benefit from friendly relations with government officials and regulators at the state and local level. Republican Gov. Jane Hull condemned the measure, saying its passage would "close the schools and open the jails." Virtually every state, county, and municipal leader joined the attack. Mayors claimed cities' revenue sharing with the state would disappear.
Teachers unions joined with other public employee unions and a public utilities lobbyist to form Arizonans Against Unfair Tax Schemes, raising about $300,000 through last August to attack the initiative. Eventually, the Arizona Chamber of Commerce joined the opposition. Phoenix sports team owner Jerry Colangelo, whose baseball team, the Diamondbacks, and basketball team, the Suns, play in a taxpayer-funded stadium and arena, agreed to raise money for the opposition. The Arizona news media gave generous coverage to charges by these groups that passage of the Taxpayer Protection Act would bring economic and social catastrophe to the state.
As a result of this backlash, some politicians who initially endorsed the measure withdrew their support. When U.S. Rep. Matt Salmon, a Republican, pulled his backing of the initiative, Gov. Hull proudly took credit for changing his mind. Other early supporters who had pledged financial support reneged, making it clear that their reason was fear of reprisal from Arizona's political and regulatory establishment. At least two developers told Lori Klein, the campaign's executive director, that they had been informed by their "government affairs" people that supporting the initiative would jeopardize relations with important state agencies.
Despite such obstacles, the initiative gained momentum, especially when the Goldwater Institute, a pro-market think tank based in Phoenix, released a study on the economic impact of eliminating the state's income tax. The study, made public in August, was the work of Debra Roubik, a respected independent economist who consults for the state government and many county and municipal governments. Roubik concluded that eliminating the income tax would yield tremendous economic benefits; indeed, she found that the stimulus from repealing the tax would generate enough revenue that, at most, only minimal, short-term increases in other taxes would be needed to achieve "neutrality." Roubik's candor had a price: At a Goldwater Institute forum discussing her findings, she said she had lost a consulting contract with Maricopa County, Arizona's most populous, because of her report.
By the July 7 deadline for inclusion on the November ballot, we had filed 235,000 petition signatures, well above the 152,600 required by law. Based on standard procedure, random sampling of petition signatures qualified the initiative for placement on the ballot. Everything seemed to be falling into place for Arizonans to vote on perhaps the most radical tax reform plan ever put on a state ballot.
The smooth sailing did not last, however. For the first time in recent memory, Arizona Secretary of State Betsey Bayless elected to subject a proposed initiative's petitions to a manual, signature-by-signature count—a process that could last until late October, well after election ballots were to be printed. That meant the Taxpayer Protection Act would be printed on the ballot, but if the official signature count in late October failed to yield the requisite number of verified names, votes on the initiative would not be counted. The Taxpayer Protection Act was the only proposed initiative out of 16 to receive such scrutiny.
Meanwhile, Arizonans Against Unfair Tax Schemes filed a court challenge against the initiative in Maricopa County Superior Court, claiming it violated the "single subject rule" of the Arizona constitution and should therefore be removed from the ballot. The single subject rule states that "if more than one amendment shall be submitted at any election, such proposed amendments shall be submitted in such a manner that the electors may vote for or against such proposed amendments separately." Arizonans Against Unfair Tax Schemes claimed the Taxpayer Protection Act comprised at least three separate amendments.
On its face, this was a risky legal gamble: The last—and only—time the courts had removed an initiative because of single subject concerns was in 1934. But "Single Subject Fever" began to spread, and three other proposed ballot measures were challenged on the same grounds. Trial courts upheld two of the measures but ordered the Taxpayer Protection Act and the Growing Smarter Plus Initiative, a measure sponsored by the state legislature, off the ballot in early August, finding that they dealt with more than one subject. All four decisions were appealed directly to the state Supreme Court, which agreed to hear them on an expedited basis because of the approaching election.
The attorney for the Taxpayer Protection Alliance, former state Assistant Attorney General Robert Carey, filed a brief making two basic points. First, he argued that the initiative in fact dealt with only one issue: "an attack on a form of taxation." Second, he argued that even if the initiative ran afoul of the single subject rule, Arizona's constitution merely required that it be placed on the ballot in separated form (a practice common in other states with similar restrictions).
In late August, the Arizona Supreme Court issued its decision on all four contested initiatives through a spokesperson. The Taxpayer Protection Act was ordered off the ballot, while the other three initiatives were given a green light. Strangely, one of the initiatives allowed to go forward was the Growing Smarter Plus Initiative, which raised single subject concerns at least as serious as the Taxpayer Protection Act. Indeed, during legislative hearings on the measure, the legislature's own legal counsel had warned that it might violate the single subject rule.
As I write, the reasoning for the Supreme Court's decision against the Taxpayer Protection Act is unknown. No oral arguments were allowed, and no written opinion has been issued—just a one-sentence affirmation of the superior court's ruling and a promise that "a formal opinion of the court will follow in due course." The order, signed by Chief Justice Thomas A. Zlaket, did not even indicate which justices had heard the case.