Threatened by Prop. 126: Mesa Police & Fire, Tempe Arts, Flagstaff and Scottsdale Road & Transportation November Tax Measures

October 18, 2018

Threatened by Prop 126: Mesa Police & Fire, Tempe Arts, Flagstaff and Scottsdale Road &Transportation November Tax Measures

Access a 15 slide presentation here

 Dave Wells, Ph.D., Research Director

Max Goshert, Sr. Research Associate



Executive Summary


Proposition 126 (Prop. 126), a constitutional amendment on November’s ballot, forbids state and local governments from creating new taxes or higher tax rates on services that were not already taxed as of December 31, 2017. Currently, Arizona exempts most services from taxation, but also taxes many services such as hotel stays, restaurants and bars.


Prop. 126 would impact any tax that is reauthorized, with one tax expiring replaced by a new version of the tax.  The new version of the tax would be subject to the restrictions of Prop. 126. The education sales tax reauthorization is a good illustration. As noted by Michael Braun of the Arizona Legislative Council in a story in the Arizona Republic, “The existing (tax) is going to expire and the new one … will start after the expiration of the existing one — just a second or two, but still,” Braun said … “One expires, the next one kicks in…. Because that is a new tax, that requires Prop. 108.”[1]



Last week the Grand Canyon Institute estimated that the education sales tax renewal will lose one-third of revenues if Prop. 126 passes, which would currently amount to $250 million annually (See Figure 1).


The impact will also hit cities—both when the reauthorize expiring sales tax measures and especially when they seek to renew such measures.  On the November ballot, four Arizona cities are seeking voter approval and all four will lose significant revenue if Prop. 126 passes.


Mesa Question 2 is requesting to increase its sales tax by 0.25 percent to raise $25 million annually for police and fire, including hiring 65 more police and 45 firefighters.  If Prop. 126 passes, this new tax would lose $10 million in revenue as its service portion is exempted, leaving only $15 million from Question 2 for Police and Fire.


Flagstaff is seeking renewal of two transportation levies and an increase with a third with Prop. 419, 420 and 421 on its ballot.  While Prop. 419 to continue an existing transportation tax should be fine, two new levies for transportation and bus service would lose 35 percent of their anticipated revenue.


Scottsdale, too, is seeking a rise in its transportation sales tax to fund road improvement projects that are eligible for matching funds from Maricopa county. There every dollar taken by Prop. 126 will be doubled. Scottsdale over 10 years aims to raise $71 million to leverage an additional $170 million from the county.  But if Prop. 126 passes, Scottsdale will have $90 million less, losing precious matching funds from the county.


Tempe is seeking to renew its quarter percent Art and Culture Tax. The tax brings in about $9 million a year,but will lose more than $3 million if Prop. 126 passes and Tempe voters approve Prop. 417.


As can be seen here, when policymakers wish to change tax policy in the state, they go to voters.  There’s no need to place a prohibition on taxing services in the state’s constitution.


It is for these reasons that both major party Gubernatorial candidates Republican Governor Doug Ducey and Democratic challenger David Garcia oppose Prop. 126.[2]




[1] Sanchez, Yvonne Wingett (2018), “Doug Ducey to sign tax measure—is he violating his pledge to never raise taxes?” Arizona Republic, March 22, Prop. 108 requred two-thirds approval in both chambers to implement a new tax.

[2] Fischer, Howard (2018), “Arizona’s Prop. 126-a ban on taxing services-draws a diverse resistance,” Arizona Daily Star, Oct 1,