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Introduction

     The economy dominated the 2010 Midterm Elections, and the campaigns for state and local ballot measures were no exception. While much attention has focused on a “national wave” that swept dozens of fiscal conservatives into Congress, that wave could also be seen in varying degrees at the state and local level. Last month, the National Taxpayers Union (NTU) published its 2010 Ballot Guide: The Taxpayer’s Perspective, which analyzed nearly 100 statewide and more than 450 local ballot measures in 33 states that impacted fiscal policy and taxpayers. Now that the votes have been counted, we look back on the results to see how taxpayers fared at the ballot box.

     NTU identified a total of 93 statewide measures with an impact on taxpayers, including 43 tax-related measures, 13 bond spending issues, 30 government reform questions, and seven in direct response to Congressional action. The good news for taxpayers is that voters approved 71 percent of the measures we identified as having the potential to lower taxes or limit government. Citizens also approved 58 percent of measures that would raise taxes or expand government; however, if bond issues are excluded from the total, the majority of measures in this area went down to defeat.

     Results from State Ballot Questions Highlighted in NTU’s 2010 Ballot Guide:

     This Issue Brief further explores home runs and strike-outs for taxpayers in the 2010 election season in the areas of taxes, bond spending, and government reform in several states across the United States. While several victories signaled an unwillingness to accept higher taxes in order to balance bloated state budgets, some golden opportunities were missed to further reduce government’s burden on taxpayers’ wallets.

Taxes

     Taxes were probably the area where limited government advocates were most successful in capitalizing on the “wave election”. This year taxpayers voted on a total of 43 measures we identified as having potential impact on tax burdens. Of those 43 measures, taxpayers voted in support of limited government on 30 of them (roughly 70 percent). The following table illustrates the results for statewide tax measures on the ballot, including an indication of whether NTU’s Ballot Guide marked it as a potential expansion or limitation of government.

     Note: A “+” sign indicates a measure to limit government and a “–” sign indicates a measure to expand government, as reported in NTU’s Ballot Guide 2010.

     On several efforts to expand the size of government, voters answered with an especially vocal “no”. Washingtonians overwhelmingly defeated (by a 2 to 1 margin) Initiative 1098, which would have imposed an income tax for the first time in the state’s history. At the same time, Washington voters approved Initiative 1053, which reinstates a supermajority requirement to raise taxes that the Legislature had recently gutted, and Initiative 1107, which repeals the recent sales tax expansion to candy, bottled water and soft drinks.

     In Missouri, citizens resoundingly approved (again, by a 2 to 1 margin) Proposition A to repeal the authority of cities to levy an earnings tax. The measure also requires voter approval for the continuation of earnings taxes in Kansas City and St. Louis at the next municipal election, and requires any earnings tax not approved by voters to be phased out over 10 years. This measure was one of several efforts nationwide to give taxpayers a more direct voice in determining their tax burdens.

     Meanwhile, several states passed structural reforms to taxation, including Indiana’s approval of a measure enacting a constitutional cap on annual property tax increases. Public Question 1 caps property taxes on residential property at 1 percent, rental property in residential areas at 2 percent, and taxes for business at 3 percent. In California, voters approved Proposition 26, which will make it harder to raise “stealth taxes” in the form of fees by subjecting more of these levies to a 2/3 supermajority vote requirement.

     In addition, voters in states like Florida, Georgia, Louisiana, Missouri, New Mexico, Utah, and Virginia heavily supported a variety of smaller tax exemptions and reductions for businesses, non-profit entities, and individuals such as military veterans.

     Still, the news was not all good for taxpayer activists. In California, voters rejected the highly contested Proposition 23, a measure that sought to suspend a California-only “cap-and-trade” bill that may lead to higher tax burdens and energy prices. Californians also approved Proposition 25 repealing the current 2/3 supermajority vote requirement to pass state budgets, making it easier for lawmakers to enact tax increases in budget debates.

     Voters in Colorado turned down three separate tax-related measures. Proposition 101 would have reduced the state income tax and various motor vehicle fees and taxes, as well as state and local charges to telecommunication services. Amendment 60 would have limited how property taxes are raised and cut mill levies in half by 2020. Amendment 61 would have prohibited state borrowing and required voter approval for local government borrowing.

     In Massachusetts, citizens rejected a rollback of the state sales tax from 6.25 percent to 3 percent. Recently elected officials had raised the rate by 1.25 percentage points, so supporters saw the proposed tax reduction as an opportunity to give an extra boost to the state’s competiveness in the region.

     In all of these states, taxpayer advocates faced strong opposition from labor unions, especially those representing public employees and other special interests that benefit from government spending. These groups contributed millions to advertising and get-out-the-vote activities to help ensure that these limited government efforts failed. For example, nine of the 13 top donations to the campaign to enact California’s Proposition 25 came from labor unions.

Bonding Measures

     As an alternative to raising taxes, lawmakers often turn to borrowing to finance everything from school construction to transportation projects. Thirteen bonding measures appeared on statewide ballots in seven states[a], with all but one being approved. Although excessive state and local debt has become an increased source of concern, this was not reflected in success rates for state-level bond measures in 2010.

Government Reform

     NTU identified 30 government reform measures that could have a potential fiscal impact on taxpayers, ranging from expansions of rainy day funds to privatization initiatives. Voters supported limited government in 17 instances (about 57 percent).

     Several key victories for taxpayers were secured in the area of government reform. Notable examples include Oklahoma, which enhanced initiative and referendum rights by approving Question 750, and Utah, which implemented a legislative ethics commission.

     Yet, some important issues including budget-balancing efforts in Arizona, the repeal of taxpayer funding for statewide political campaigns in Florida, and privatization of state liquor sales in Washington fell short at the ballot box.

Responses to Congressional Action

     Beyond the traditional issues of taxation and spending, voters decided on seven measures in six states that were a direct reaction to developments in the United States Congress. In two of the three states that voted on it, citizens strongly supported preventing the imposition of an “individual mandate” to purchase health insurance. Four states also voted to guarantee the right to a secret ballot in union organizing elections, in response to federal “card check” legislation.

Health Insurance Mandate

Secret Ballot in Union Organizing

Local Measures

     Voters also had to sort through hundreds of local tax, spending, and accountability measures on the November 2^nd ballot. In California, dozens of measures were approved to authorize the issuance of millions of dollars in school construction and maintenance bonds, which will increase local government indebtedness and may lead to higher property taxes. Similar measures were also on the ballot and approved in Colorado, Illinois, Michigan, Ohio, Oregon, Washington, and Wisconsin.

     A number of communities also approved increases in local taxes. In California, Costa Mesa approved a measure that would increase the city’s hotel tax by two percent. Additionally, citizens in several localities, including the California towns of Guadalupe and Placentia, approved measures to expand taxes on telecommunications to more services, such as wireless telephones, Internet telephones, and text messaging. Voters in Boulder County, Colorado approved both a sales tax increase earmarked for open space preservation and a property tax increase earmarked for human services.

     But taxpayers did not accept all efforts to increase spending or taxes. Although voters approved scores of bonds, in California, Illinois, and Ohio they also defeated many measures that would increase borrowing.

     The California town of La Palma, in Orange County, approved a measure that would require annual reductions in the city’s utility users’ tax. Notably, San Francisco rejected both an increase in the city’s hotel tax and an effort to tax online hotel reservations. In Polk County, Florida a measure that would have increased the county’s sales tax to fund public transportation projects failed.

     Several communities embraced measures to make government more accountable. The California towns of Roseville and Fullerton approved a measure limiting city council members to three consecutive terms. San Francisco enacted a measure repealing a provision in the city charter that guarantees transit workers high salaries. In Florida’s Brevard County, citizens adopted a measure allowing them to make recommendations to the County Commission on government efficiency and effectiveness.

     Concerns about the ballooning costs of public employee pensions were also of importance to voters. In California’s San Diego County, citizens gave the nod to a measure requiring popular referendums for any future increases in public safety employee benefits. Additionally, several communities in Illinois’ DuPage and Lake Counties approved measures calling on the state to take immediate steps to implement meaningful reforms to pensions for public safety workers.

Conclusion

     While the 2010 election was generally a success for fiscal conservatives, it was not without its surprises. On tax policy, there was relatively broad opposition to higher burdens and support for targeted reductions. Meanwhile, several states’ voters took the relatively rare step of using their own ballots to directly protest efforts by the federal government.

     Ballot measure contests in other years may have recorded bigger waves of victories for taxpayer activists. The late 1970s, early 1980s, and early 1990s saw passage of landmark laws that restricted the growth of future taxes through a variety of procedures. Still, 2010   represented a palpable change in fiscal tide, one that empowered tens of millions of Americans to decide for themselves just what government should (and shouldn’t) do. That alone is a victory for taxpayers of all political stripes.

About the Author

Joseph Moser is Policy Analyst for the National Taxpayers Union Foundation.