As the nation dissects the results from this week’s congressional, gubernatorial, and state legislature elections, an NTU analysis of state and local-level ballot measures indicate several trends: voters generally rejected large tax increases, embraced tax limits, and supported initiatives to limit the size and scope of government. While taxpayers scored some significant victories on consequential ballot measures, there were some notable exceptions.
Earlier this month NTU released its 2018 Ballot Guide, which analyzed 360 important state and local fiscal policy ballot questions. Below is brief recap of how some of the notable initiatives fared on Tuesday.
Income Tax Measures
Colorado voters rejected Amendment 73 by a 55 to 45 percent vote margin. Amendment 73 proposed replacing Colorado’s fair, flat tax rate of 4.63 percent with a progressive system with 5 tax brackets containing significantly higher rates. This Amendment also would have boosted the corporate income tax rate from 4.63 to 6 percent. These tax increases would have generated nearly $1.6 billion in new annual revenue. Voters previously rejected similar measures in 2011 and 2013. Read NTU’s full analysis on Amendment 73 here.
Maine voters rejected Question 1 by a 66 to 34 percent vote margin. Question 1 proposed establishing a new 3.8 percent state payroll tax on families and individuals, with the tax split equally between workers and employers. All revenue would be directed to fund a universal home care program for seniors and people with disabilities, regardless of their income. This measure would have generated over $300 million in new annual revenue. Read NTU’s full analysis on Question 1 here.
Business Tax Measures
Aside from the aforementioned Amendment 73, there were no statewide ballot measures that would have raised taxes on corporations or other businesses. However, there were local ballot measures in California and Oregon that raised taxes on job creators. These tax hikes will take much needed capital out of businesses, greatly affecting their ability to expand, hire, and remain competitive.
Voters in Portland, Oregon (Multnomah County) approved Measure 26-201 by a67 to 33 percent vote margin. This measure establishes a 1 percent gross receipts tax on businesses within city limits with more than $1 billion in national sales and $500,000 in sales within Portland. This misguided measure will raise about $30 million in revenue and will be used to finance clean energy projects across the city. By approving this measure, consumers are likely to pay more for goods, firms will be less likely to expand into Portland, and businesses will be less likely to hire new workers.
Voters in Mountain View, California (Santa Clara County) approved Measure P by a 70 to 30 percent vote margin. This measure establishes a graduated tax on companies depending on the number of employees a firm has. These “head” taxes, as they are called, are a tax on jobs. This means the more people a business employs, the more in tax they will be liable for. This tax will impact small businesses all the way to the large tech businesses within the city limits. Measure P is estimated to generate an estimated $6 million in annual tax revenue to help finance transit projects.
Voters in San Francisco, California approved Measure C by a 60 to 40 percent vote margin. This measure creates a gross receipts tax on large companies, with the tax rate depending on the industry the firm operates in. The city estimates this measure will reduce the number of jobs in the city by 900 jobs and will raise the price of goods for consumers. This measure is estimated to generate $300 million in annual revenue to fund services for the homeless.
Local Marijuana Taxes
Voters in localities across California approved 63 ballot measures increasing or establishing gross receipt taxes on marijuana related businesses. In all, these 63 measures are estimated to generate $93 million annually in new tax revenue.
Taxpayer Protection Measures
Voters in a slew of states and localities approved measures to limit the ability of their government to raise taxes and fees. Voters also passed important taxpayer safeguards.
North Carolina voters approved by a 57 to 43 percent vote margin an amendment to the state constitution lowering the maximum income tax rate. This amendment reduces the “max” tax rate from 10 to 7 percent, which is still higher than the current rate of 5.49 percent. While this measure will not directly impact taxpayers today, it will limit the ability for future lawmakers to enact large tax increases down the road. Read NTU’s full analysis on this measure here.
Florida voters weighed in on three important ballot measures: approving Amendment 2 by a 67 to 33 percent vote margin, Amendment 5 by a 67 to 33 percent vote margin; but barely missed the 60 percent threshold to approve Amendment 1. Amendment 2 makes permanent the cap of 10 percent on annual non-homestead parcel assessment increases which is set to expire January 1, 2019. This cap is an important protection for rental buildings and commercial property owners from potentially large property tax increases in the future. Amendment 5 requires a supermajority within the state legislature to raise taxes or fees above their current level. This important taxpayer protection would ensure new limits on government overreach into citizens’ wallets and help rein in spending. Amendment 1 would have raised the property tax exemption on homes from $100,000 to $125,000, resulting in savings for millions of homeowners across Florida. Read NTU’s full analysis on Amendment 5 here.
Indiana voters overwhelmingly approved a Balanced Budget Amendment to the state constitution by a 71 to 29 percent vote margin. This measure requires the General Assembly to adopt balanced budgets unless two-thirds of the members of both chambers vote to suspend the threshold. This important amendment will ensure lawmakers continue to spend within their means and hopefully limit the amount of debt the state incurs.
New Hampshire voters approved Question 1 by an 82 to 18 percent vote margin. This measure adds an amendment to the state constitution stating taxpayers have a right to bring legal action against the state or local government if spending is in violation of a law.
In Fresno, California, voters approved a balanced budget amendment to the city charter by an 80 to 20 percent vote margin.
Voters in Oregon resoundingly defeated Measure 104 by a 67 to 33 percent vote margin. This important measure would have amended the state constitution to require a three-fifths supermajority vote requirement on any legislation that raises revenue through changes to tax exemptions, credits, or deductions.
Measures Impacting the Size of Government
Nebraska voters barely approved Initiative 427 by a 53 to 47 percent vote margin. This measure changes the eligibility requirement for Medicaid recipients to cover any person whose income is equal to or below 138 percent of the federal poverty line. The federal government would assume 90% of the costs associated with state Medicaid expansion, with the state gradually increasing its portion of the estimated $600 million annual cost.
Idaho voters approved Proposition 2 by a 60 to 40 percent vote margin. This measure changes the eligibility requirement for Medicaid recipients to cover any person whose income is equal to or below 138 percent of the federal poverty line. The federal government would assume 90% of the costs associated with state Medicaid expansion, estimated to be $45 million annually in Idaho.
Utah voters approved Proposition 3 by a 55 to 45 percent vote margin. This measure changes the eligibility requirement for Medicaid recipients to cover any person whose income is equal to or below 138 percent of the federal poverty line.
Montana voters rejected Initiative 185 by a 52 to 48 percent vote margin. This misguided measure would have unwisely raised the state tobacco tax to cover the cost of Medicaid expansion. However, tobacco tax revenues are extremely unreliable and would have authorized a large program without a stable funding stream, and likely would have required the rest of Montana taxpayers to pick up the tab.
California voters rejected Proposition 10 by a 62 to 38 percent vote margin. This measure would have repealed the 1994 Costa-Hawkins Act, which would have allowed local governments to enact rent control ordinances.
Voters in localities across California approved 31 ballot measures to raise taxes on land parcels. In all, these 31 measures are estimated to increase taxes on certain property owners by $367.6 million annually.
Arizona voters approved Proposition 126 by a 67 to 33 percent vote margin. This proposition will create an amendment to Arizona's constitution permanently banning politicians from levying taxes on services.
Nevada voters approved Question 2 by a vote of 56 to 43 percent, and Question 4 a vote of 67 to 33 percent. Question 2 creates a tax exemption for feminine hygiene products and Question 4 requires the legislature to enact a tax exemption for certain medical equipment. While these exemptions are good for a select few products, taxpayers should be worried about carve outs in the tax code.
Colorado voters rejected Proposition 110 by a 60 to 40 percent vote margin. This proposition would have increased the state sales tax rate from 2.9 to 3.52 percent for 20 years to fund transportation projects across the state. This measure would have raised about $10 billion over lifespan of the tax. As is the case with sales tax hikes, those with limited means would be most impacted.
South Dakota voters defeated Measure 25 by a 55 to 45 percent vote margin. This measure would have raised the state tobacco tax from $1.53 to $2.53 per pack and would have generated about $35 million in annual revenue to finance programs in the state budget. However, tobacco revenue is very unstable. As the amount of revenue from the tax drops, lawmakers would be forced to raise taxes and fees elsewhere in the budget to offset the declining revenue.
Missouri voters defeated Proposition D by a 54 to 46 percent vote margin. This measure would have increased Missouri’s gas tax by more than 50 percent, increasing the rate from 17 to 27 cents per gallon. This measure would have raised nearly $300 million in annual tax revenue.
Utah voters rejected Non-binding Question 1 by a 65 to 35 percent vote margin. This measure asked voters whether the Utah legislature should raise the state gas tax by 10 cents per gallon to provide more funding for local roads and education programs. Had this measure been approved, it would have increased taxes by $100 million annually.
Voters in localities across California approved 33 ballot measures to raise short-term rental taxes on hotels and other 3rd party rental services. In all, these 33 measures are estimated to raise taxes by $32.5 million annually, which will be added on to guests’ bills at the end of their stay.
Voters in localities across California also approved 55 ballot measures increasing, or renewing their local sales tax rate. In all, these 55 measures are estimated to raise taxes on consumers by $512.6 million annually.
Washington State voters defeated Initiative 1631 by a 56 to 44 percent vote margin. This initiative would have established a first in the nation carbon tax starting January 2020 at a rate of $15 per metric ton and increasing by $2 per year until all the state’s greenhouse gas reduction goals for 2035 are met. This is the second time in 3 years Washington voters have rejected a carbon tax.
Colorado voters rejected Proposition 112 by a 57 to 43 percent vote margin. This measure would have imposed new regulations on fracking and energy extraction that would have effectively banned energy development in Colorado.
Arizona voters handedly rejected Proposition 127 by a 70 to 30 percent vote margin. This measure would have required utility companies to generate at least 50 percent of their electricity from renewable sources by 2030. As NTU noted in a recent blog post, “the heavy-handed energy regulations will cause crippling price increases on energy consumers and stymie economic growth and prosperity.”
Nevada voters approved Question 6 by a 60 to 40 percent vote margin. This measure is exactly the same as Arizona’s Proposition 127 and requires utility companies to generate at least 50 percent of their electricity from renewable sources by 2030. Nevada ratepayers will likely see higher energy prices in the coming years. Also in Nevada, voters rejected Question 3 by a 67 to 33 percent vote margin. This measure would have opened up the state’s energy market into a competitive one, rather than just one company having monopoly control.
Arkansas voters approved Issue 5 by a 66 to 34 percent vote margin. This measure will gradually increase the state minimum wage to $11 per hour by 2022.
Missouri voters approved Proposition B by a 62 to 38 percent vote margin. This measure will gradually increase the state minimum wage to $12 per hour by 2023.
Voters in Oakland, California (Alameda County) approved Measure Z by a vote of 75 to 25 percent. This measure increases the minimum wage for all hotel workers to $15 per hour, or $20 per hour if the hotel does not provide employees with certain health care benefits. This new wage rate will take effective July 1, 2019.
Voters in Flagstaff, Arizona (Coconino County) barely failed to meet the 60 percent threshold on Proposition 418. This measure would have overturned the minimum wage increase approved in 2016. As a result of Prop 418’s loss, Flagstaff’s minimum wage will continue to steadily increase to $15.50 an hour by 2022. Had the Proposition passed, the city’s minimum wage would have been made the same as the state’s.
Washington State voters approved Initiative 1634 by a 55 to 45 percent vote margin. This measure prohibits localities from adopting new taxes on groceries or specific grocery subcategories. This measure is an important taxpayer protection against revenue-hungry politicians interested in enacting regressive taxes on certain grocery items.
Oregon voters rejected Measure 103 by a 57 to 43 percent vote margin. This measure would have added an amendment to the state constitution prohibiting state and local governments from enacting taxes on groceries or specific grocery items.