(Disclosure: Rose Law Group represents Ann Siner of My Sister’s Closet and Judge John Buttrick in their litigation efforts against 208.)
By Abraham Gross | Law360
An approved Arizona ballot measure that will impose a 3.5% income tax surcharge on the state’s highest earners to fund education programs is unconstitutional, a retired state judge, a state resident and her business told a state court.
In a complaint filed Monday in Maricopa County court, retired Judge John Buttrick, Ann Siner and her company, Eco-Chic — which does business under the name of My Sister’s Closet — said Proposition 208 violates the state constitution by exceeding tax limits and by restricting the Legislature’s powers.
Proposition 208, which passed in November by an approximately 52% to 48% vote, levies the surcharge on individuals with more than $250,000 in annual income, or joint filers with more than $500,000 in annual income, starting in tax years beginning from and after Dec. 31.
Arizona’s highest tax bracket currently imposes a 4.5% tax on people with more than $159,000 in income, or more than $318,000 for joint filers. The measure is estimated to raise $940 million annually to fund education programs.
Thomas Galvin, who represents Buttrick, Siner and her company, told Law360 on Wednesday that the taxpayers were all directly affected by the surcharge. He said that Arizona businesses under S corporation status — including My Sister’s Clothing — would also be indirectly subject to the tax when their income flows through to owners like Siner who meet the proposition’s threshold.
“This is just a bolt out of the blue that just upends her business plans that have been underway for the last couple of years,” Galvin said of Siner.