Fall Election Features Bumper Crop of Ballot Measures for Tax Cuts, Hikes

Published December 1, 2008

While presidential candidates Sens. John McCain and Barack Obama occupy the top electoral slots this fall, voters will have numerous choices to make on state and local measures further down the ballot.

A comprehensive review of state and local tax measures by the nonpartisan National Taxpayers Union identified 95 ballot questions in 34 states of interest to taxpayers.

The year 2008 could be especially important for the taxpayer movement, as numerous strong tax limitation measures made the ballot across the country. Many tax hikes also have been placed before the voters.

State Tax Limits Proposed

Here are some of the proposed tax limitation measures:

* Massachusetts’s Question 1 would reduce the state individual income tax from 5.3 percent to 2.65 percent beginning in 2009, with complete repeal in 2010. On average, taxpayers would save $3,700 a year once the income tax fully phases out.

* North Dakota’s Statutory Measure No. 2 would lower the state corporate income tax by 15 percent and cut the state personal income tax in half (with a few exceptions) beginning in 2009. North Dakota is projected to have a $1.3 billion budget surplus this fiscal year, and this measure could save taxpayers more than $415 million over the next two years.

* In Arizona, Proposition 100 would prohibit state and local governments from imposing a tax when property is bought, sold, or transferred. This type of tax is popular with some elected officials because taxpayers likely won’t notice it until they make a property transaction. By that time, the taxpayer has little choice but to shoulder the burden of hundreds or even thousands of dollars.

* Arizona voters also will consider Proposition 105, which would place a strong majority vote requirement on tax or spending hike plans. Specifically, a vote of support from a majority of qualified voters would be necessary to pass an initiative imposing higher taxes or spending.

* Maine’s Question 1 would repeal new taxes on malt beverages, liquor, wine, and soft drinks, and it would repeal a fixed fee that is charged to health insurance companies on paid claims. The new laws were enacted by the state legislature in April 2008 to help fund the state’s Dirigo Health program, which has experienced large financial shortfalls.

* Oregon’s Measure 59 would put a “prohibition on double taxation,” making all federal income taxes fully deductible on state income tax returns beginning in 2010. Oregonians currently can deduct $5,600 or less of federal taxes. This measure would save taxpayers an estimated $1.3 billion over the next two years.

Electoral Threats on Ballots

It’s not all good news for proponents of limited government, however.

In Nevada, citizen activists labored mightily through an off-again, on-again ballot drive for property tax limits while harassed by legal challenges from opponents. Question 5 would have limited property taxes to 1 percent of a property’s base value, and the base assessment, with certain exceptions, would never increase more than 2 percent annually.

The proposal strongly resembled California’s landmark Proposition 13, which in 1978 touched off the modern nationwide taxpayer revolt. Question 5’s supporters were in the middle of appealing to the State Supreme Court a ruling on a Nevada State Education Association lawsuit against the measure when the secretary of state instructed counties to begin printing election ballots without Question 5.

In perhaps the most serious assault on taxpayers, Colorado’s Amendment 59 would effectively undo the state’s Taxpayer Bill of Rights. The TABOR restricts the annual growth of state tax revenue to inflation plus population growth and requires any funds collected in excess of this formula to be returned to taxpayers.

Amendment 59 would eliminate the tax refunds from TABOR and instead funnel that money into a state education fund. It also would repeal Amendment 23, which requires the state to spend increasing amounts on public schools. Though taxpayer advocates see Amendment 23 as problematic, they believe reforms should focus on directly addressing its minimum-spending requirement instead of scrapping TABOR.

More Tax Hikes Proposed

Quite a few other tax hike questions have made their way onto state ballots, including the following:

* In Minnesota, a constitutional amendment would increase the state sales tax by three-eighths of 1 percent, with the new revenues dedicated to additional spending on natural resources and the arts. If approved, it’s estimated the amendment will cost taxpayers $11 billion over its 25-year lifespan.

* Colorado’s Amendment 58 would raise taxes on oil and natural gas production. Supporters suggest this punitive tax will somehow redress record profits of oil and gas companies, but the ultimate effect of the measure would be to double the tax rate on oil and gas production in Colorado.

* Also in Colorado, Amendment 51 would hike the state sales tax by two-tenths of a cent, estimated to increase taxes by $186 million annually, to expand programs aimed at the developmentally disabled.

* Many Californians will vote on telecommunications tax increase questions put on the ballot by their localities. In most cases they will be asked to approve a local 911 tax or a utility users tax (UUT). Many of these questions will be framed as a way to increase emergency services funding or pass a “tax cut,” but most are nothing of the sort, analysts say.

Many of the existing local 911 taxes are of dubious legality because they were established without a necessary two-thirds vote from residents, so approving them now would kill future efforts to remove them on constitutional grounds. The UUTs are linked to a federal tax that is no longer collected for most telecommunications services, so if voters approve measures to “delink” it from the federal tax, they’ll effectively be cementing the imposition of an unnecessary and potentially illegal tax on their service.

* In Oregon, Measure 56 would change the state constitution to weaken the “double majority” rule preventing a tax hike from taking effect unless 50 percent of registered voters turn out and 50 percent of the votes are in favor of it. The “double majority” rule has stopped many tax hikes by preventing a minority of registered voters from imposing a tax on everyone.

Initiative Process Under Attack

In perhaps the most troubling trend of 2008, the initiative and referendum (I&R) process itself has come under attack, with proposals up for consideration in Colorado, Ohio, and Wyoming making it harder to qualify I&R measures for the ballot. Still, taxpayer activists across the country are successfully pursuing the ballot-box process, with pro-taxpayer measures already circulating for 2009 in Maine.

While the initiatives, referenda, amendments, and measures noted here comprise some of the most significant ballot questions affecting taxpayers this fall, NTU encourages voters to visit its Web site (http://www.ntu.org) before and after November 4 for detailed policy information and vote results.

Kristina Rasmussen ([email protected]) is director of government affairs for the 362,000-member National Taxpayers Union in Washington, DC.

For more information …

Detailed policy information and vote results on initiatives, referenda, amendments, and measures around the nation are available at the National Taxpayers Union Web site: http://www.ntu.org