This November, Arizona voters will go to the polls to vote up or down on Proposition 126, which would prevent the Arizona State Legislature from ever imposing a tax on services.
According to the bill’s language, a “yes” vote will prohibit the state and local governments from enacting any new or increased tax on services that was not already in effect on Dec. 31, 2017, while a “no” vote will preserve the state and local governments’ existing authority to impose a tax on services in the future.
Prop 126 would essentially lock in the current taxes, if any, already charged on some services provided by businesses.
While no such tax is on the radar, a legislative bill this session floated the idea to increase the state’s tax base beyond just state taxes on income, property and sales of tangible goods. The bill went nowhere and died before reaching committee, but it spooked Realtors and business owners around the state into a preemptive strike.
The Arizona Association of Realtors and the Arizona chapter of the American Institute of Architects, whose high-end services would greatly increase the cost on their customers, were the first sponsors of the proposition. They were joined by the Arizona Retailers Association and the Arizona Small Business Association, because many of the their members provide services — not necessarily tangible products — could be affected by a future tax.
A service tax could conceivably be imposed on childcare and babysitting; health care; self-defense instruction; educational tutoring; haircuts; manicures; tattoos; dry cleaning; car repairs; car washes; funerals; legal services; banking; accounting; advertising; trash and recycling pickup and other waste hauling; technical installations; parking attending; pet case and veterinary services; real estate; construction; plumbing; lawn care; travel arrangements; heating and air conditioning installations and repairs; appraisals; and inspections.
None of these services involve the transfer of physical goods and are exempted from sales tax collection, and all these businesses already pay business and income taxes to the state.
With American medical bills and insurance costs already high enough, a service tax could also be imposed on visits to physicians, surgeons, nurses, physical therapists, dentists, eye doctors and psychologists, psychiatrists, chiropractors, counselors and hospital visits.
To no one’s surprise, Proposition 126 is opposed by both Gov. Doug Ducey, his Democratic challenger David Garcia — and former Democratic gubernatorial Steve Farley — for the simple reason it would preclude them from imposing a tax — in Ducey’s case so that he could use it to give tax breaks to businesses and wealthy donors, and in Garcia and Farley’s case, so they could tax services to fund state programs.
No gubernatorial candidate wants to be the bad guy and raise state property, sales or income taxes and face voter backlash.
Oddly, the Arizona Chapter of the Libertarian Americans for Prosperity political action group that touts limited government as its chief concern, opposes the proposition claiming the exemption on service taxes picks “winners and losers” based on the types of services businesses provide. The argument is fatally flawed by the simple fact that a consumer pays a sales tax on purchasing a new suit or a new car but not a service tax on getting them cleaned. Two totally different businesses providing different types of services to a consumer and they are not comparable.
Arizona lawmakers can easily find other means to fund our state from sources that can afford it, rather than trying to generate revenue by nickel and diming Arizona taxpayers — especially our poorest residents.
Unlike Proposition 127, which would enshrine unnecessary restrictions about electricity generation into Arizona’s constitution, adding Proposition 126 would prevent the Arizona State Legislature from imposing service taxes over the objections of state residents.
Arizona’s founders, distrustful of themselves and future lawmakers to obey the public’s sentiment, wrote into the state’s constitution that any legislation added to it could not be removed, altered or adjusted without another constitutional amendment approved by voters.
Vote yes on Prop 126.
Christopher Fox Graham
Managing Editor
