Arizona Free Enterprise Club v. Hobbs
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The Supreme Court held that the exemption from the referendum power for law "for the support and maintenance of the departments of the state government and state institutions," see Ariz. Const. art. 4, pt. 1, 1(3), apples to tax measures and that a revenue measure is exempt from referendum provided that it is for the support and maintenance of existing departments of the state government and state institutions.
SB 1828 was signed by the Governor as a tax bill for the 2022 fiscal year and imposes a "flat" tax of 2.5 percent on taxable revenues but becomes effective only if the state General Fund revenues reach specific targets. Invest in Arizona (IIA) sought to prevent implementation of the flat tax by referring SB 1828 to the ballot in the November 2022 general election. Appellants filed a motion for preliminary injunction seeking to enjoin the Secretary of State from accepting or certifying any petition filed in support of a referendum of SB 1828, including IIA's petition. The trial court ruled that SB 1828 is referable and denied the preliminary injunction request. The Supreme Court reversed, holding that the exemption from the referendum power for laws "for the support and maintenance of the departments of the state government and state institutions" applies to tax measures.
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