As the dust is still settling from the midterm elections, it's easy to get lost in the minutiae of reading and reloading the results of congressional races across the country, however many impactful votes on ballot measures have already been decided.
NTU provided a carefully curated list of potentially impactful ballot measures ahead of the election and would like to now highlight some of the results. As taxpayers sift through the myriad of measures that passed in their states and local jurisdictions they will likely see a mixed bag for the new tax environment.
In a surprising victory, California has voted down its “multi-millionaire tax,” Proposition 30, which would have raised taxes on 43,000 taxpayers to fund electric car rebates and wildfire recovery efforts. Proposition 30 sought to increase the personal income tax by 1.75 percentage points for earnings above $2 million, and would have directed the tax revenue to subsidizing the purchase of zero emission vehicles. These tax subsidies often only benefit those wealthy enough to consider zero emission vehicles an option. A portion of the funds collected would have also been used to provide infrastructure improvements, ensuring owners of zero emission vehicles had access to charging stations.
However, California taxpayers did not come out of the election unscathed, as voters approved Proposition 31, which will effectively ban the sale of flavored tobacco products and tobacco flavor enhancers in the state, with an exception for hookah, loose leaf tobacco, and premium cigars. It will also put in place a fine of $250 per violating sale. By approving Proposition 31, the state has eliminated up to $100 million in state tax revenue which will need to be made up in other parts of the state budget or by raising taxes in the future.
Massachusetts passed its “millionaire tax,” which will place an additional four percentage point tax on residents making one million dollars or more. While this will only affect just shy of one percent of the state's population, not all of those impacted make a million dollars each and every year. An estimated 50 percent of affected taxpayers do not consistently earn $1 million, but rather are one time “windfall” earners. These are, for instance, people who sell a small business or retirees who sell their lifelong homes. The tax is likely to raise $1 billion in revenue in its first year, however experts expect that figure to level off in future years, as higher earners look to move to more tax friendly states.
In Arizona Proposition 132 was approved. Proposition 132 removes the current 60 percent requirement for ballot measures to approve new taxes. The threshold would be lowered to a simple majority, or 50.01 percent, easing the process to implement new taxes in Arizona. By lowering the threshold for new taxes to be approved, taxpayers in Arizona are creating a fast track for higher tax burdens to be implemented with relative ease.
In a striking blow to free speech, Arizona has approved Proposition 211, which will now require the public reporting of individuals or organizations who spend more than $50,000 in a statewide campaign or more than $25,000 in local campaigns. Information to be reported includes records of donor identity, names, addresses, and the sources of funds on donations. This will certainly result in a chilling effect on free speech in Arizona, and potentially lead to doxxing and harassment of political donors.
Arizona did score one small victory for taxpayers though, by voting down Proposition 311, which would have raised the sales tax in the state by .1 percentage point from 2023 until 2042.
In another blow to taxpayers, West Virginia defeated Amendment 2, which would have granted the legislature the authority to reform personal property taxes in the state. Currently, West Virginia is the only state that imposes taxes on business inventory. This would have been a unique opportunity for West Virginia to better align with its surrounding states and create a more competitive environment for new and expanding businesses. Although subsequent legislation would have been needed to further define and expand on the effects of the constitutional amendment, businesses and taxpayers would have likely seen a decrease in taxes owed on personal property being used for business purposes.
In Colorado, voters decided to pass Proposition FF, which raises taxes on those earning $300,000 or more to fund a school meals program, meaning about 5 percent of the state's population will be immediately impacted by the tax hike.
Colorado also approved Amendment E, which changes the Colorado state constitution to extend property tax exemptions for veterans who are 100% permanently disabled to the surviving spouse of the veteran. The exemption remains the same; those who are 100% disabled or their spouse will receive an exemption on their property tax of 50% on the first $200,000 of a property’s actual value.
Colorado was the only state to pass a statewide ballot measure to lower taxes, Proposition 121, which will go into effect January 1, 2022. Proposition 121 will decrease the state income tax rate from 4.55 percent down to 4.40 percent. The measure will also reduce the tax rate for domestic and foreign C corporations from 4.55 percent to 4.4 percent.
Georgia approved Referendum B, which will expand current farm products tax exemption status to apply to any entity that is a merger of two or more family farms and extend the exemption to include dairy and egg products. It is still unclear at this time how many farms will benefit from the expanded tax status.
Georgia also approved Amendment 2, which is a unique solution to help post-disaster recovery. Local governments in Georgia will now be able to grant temporary tax relief to properties that are damaged or destroyed due to disaster so long as they are located within a nationally declared disaster area.
Louisiana defeated Amendment 5, which would have increased taxes by allowing ad valorem property tax millage rates to be increased by a two-thirds vote of any taxing authority up to the constitutionally allowed maximum rate until the authorized rate expires. By defeating the amendment the current system of increases remains in effect and local taxing authorities can only increase rates up to the maximum authorized rate in effect the prior year.
Louisiana approved Amendment 8, which removes the annual income recertification requirement for disabled homeowners and their spouses. By striking the annual requirement to certify annual gross income at or below $100,000, homeowners who receive a special assessment will likely maintain that special assessment for longer periods of time, reducing their potential taxable property value for longer stretches.
Baton Rouge approved the renewal of a tax on $1.06 per $100,000 of assessed property value for the purpose of fighting mosquito infestation and their rodent problem in the jurisdiction. This tax is estimated to result in around $5,000,000 in value per year for ten years.
Although this is just a sampling of the hundreds of statewide and local ballot measures that were decided upon in the November 8th election, it's important for voters and taxpayers alike to remember that all politics are local and can have an impact on our daily lives. As we look to next year and the 118th Congress, NTU expects to see more harmful tax policy proposals and will work to continue to keep taxpayers informed on the effects these will have on their lives.