Page 29 - AASBO EDGE Fall 2021 WEB

AASBO SUMMER CONFERENCE WRAP-UP

BY DON HARRIS
Randie Stein
Schools Facing Uncertainty Over Taxes, Revenue

Randie Stein, who understands and explains the nuances to leave Arizona, that
of taxes as well as anyone in Arizona, gave AASBO everything is fine
members a nuts-and-bolts presentation of legislative and that your income
actions that figure to impact public schools. taxes really aren’t
going up because the
But sometimes taxes can prove to be a moving target state will pick it up
– more about that later. At the closing session of the for you,” Stein said.
AASBO Summer Conference and Expo on July 24,
Stein, Managing Director of Stifel, an investment But it also reduces
banking company, talked about the impact of a flat tax the money going
rate on Invest in Ed and Proposition 208. The tax rate to the state general
on income determines tax liability. For tax year 2021, fund, she said, and
there are four tax rate brackets with rates ranging from that it is clearly the desire of policymakers to mitigate
2.59% to 4.50%. the taxpayer liability associated with what voters
approved last year in Prop. 208.
Prop. 208, the education-backed ballot measure
approved by voters last year, establishes an individual And, SB 1828 phases in the individual income tax rate
income tax surcharge of 3.5%, which increases the structure to a flat income tax rate, subject to general
highest marginal tax rate to 8%. The threshold for fund revenue triggers, Stein explained. “It reduces
the surcharge is taxable income above $250,000 for general fund collections associated with the decline in
individuals and $500,000 for couples filing joint the marginal tax rate, and the ultimate outcome is a flat
returns, with the proceeds estimated at more than $800 tax rate of 2.5 %, she said.
million a year going to public education.
“The biggest elephant in the budget
“There is a lot of discussion on when that money would is where legislators turn when they
get to school districts,” Stein said at the time. “Probably
fiscal 2023, if all goes well.” Well, all didn’t go well. get into a money crunch.”
Stein touched on three pieces of legislation that deal
with Arizona’s individual income tax. Senate Bill 1783 “I can’t overstate enough a $1.5 billion per year
creates an alternate income tax for small business. reduction in revenue to general fund,” Stein said. “State
Stein explained: “You can’t be subject to the Prop. 208 aid is the single largest general fund budget expenditure
surcharge if you don’t have Arizona individual income,” each year, and $5.2 billion of the $12.8 billion general
Stein said. It is intended to avoid the surcharge. But fund budget – or 41% – is state aid to schools. What
don’t be fooled, Stein said, the bill also applies to happens if there is a downturn? The biggest elephant in
interest and dividend income. the budget is where legislators turn when they get into
a money crunch.”
SB 1827 caps the combined individual income tax rate
and Prop. 208 education income tax surcharge at 4.5%. Less revenue inhibits program expansion and makes
“This bill is intended to encourage wealthy people not it more difficult to pay off the rollover, Stein said,
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