Arizona House votes to let small-business owners avoid Prop. 208 surcharge

(Disclosure: Rose Law Group represents Ann Siner of My Sister’s Closet and Judge John Buttrick in their litigation efforts against 208.)

By Howard Fischer | Capitol Media Services

PHOENIX — Republican state representatives voted Friday to allow the owners of small businesses — and anyone who organizes their finances for tax purposes as one — to escape paying the voter-approved income tax surcharge on the wealthy to fund education.

That would cut hundreds of millions of dollars from what is supposed to go to schools.

Under current law, many small businesses are organized in a way so their income passes through to their owners. That means the owners now compute what they owe the state on their personal income tax forms, after deducting all business expenses.

Proposition 208, approved by voters by a 52% margin in November, imposes a 3.5% surcharge on adjusted personal income of amounts above $250,00 for individuals and $500,00 for married couples filing jointly. That makes the owners of these small businesses liable for the surcharge on amounts they retain as profits above those figures.

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