On November 3, 2020, Arizona voters approved Proposition 208 (Prop 208), the Tax on Incomes Exceeding $250,000 for Teacher Salaries and Schools Initiative. Also referred to as the Invest in Arizona Act, Prop 208 provides for the imposition of a new income tax surcharge of 3.5%, in addition to the existing income tax, on Arizona individual taxable income above $250,000 ($500,000 for married couples filing jointly and heads of household). The surcharge is scheduled to begin with the 2021 tax year.
Revenues received from the surcharge will be placed in the Student Support and Safety Fund (SSSF) and then, after paying administrative costs, allocated to designated grants and funds aimed at hiring, training, and retaining teachers, as well as providing career and technical programs to Arizona high school students across the state.
Currently, the highest rate of Arizona individual income tax is 4.5%, which is the fourth-lowest out of the 41 states that impose an individual income tax. The 3.5% surcharge effectively raises the highest Arizona individual tax rate to 8%, making it the ninth-highest in the country.
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