Tax Increases on the Ballot
Updated Nov. 7, 2012, 11:45am MST
Tax and budget measures are a mainstay of the initiative process. Most often, these measures seek to reduce taxes and other sources of revenue, but it is not uncommon to see tax increase proposals on the ballot too.
Tax Increases on the 2012 Ballot
This year, there were proposed tax increases on the ballot in six states. Most of them would have directed the new revenue to education, the area for which voters are historically most likely to support tax increases. This year's collection of tax increase proposals included:
Voters rejected an increase in the state sales tax from 4 percent to 5 percent to benefit education primarily, and also transportation infrastructure and human services programs. Voters first approved this tax on a temporary basis in 2010, and the temporary bump is scheduled to expire next year. This year's Proposition 204 would have made the increase permanent, and prohibited the legislature from dipping into these funds for other purposes.
Issue 1, referred to the ballot by the legislature and approved by voters,temporarily increases the tax on diesel sales to fund transportation projects.
California had three proposed tax increases on the November ballot, two competing with each other to fund education. Voters approved two of the three. The third will likely add to education funding too, although its effect will be less direct.
Proposition 30, an initiative sponsored by Governor Jerry Brown and approved by voters, was one of two tax increases on the California ballot that would fund K-12 education and community colleges. It will temporarily increase the state sales tax by a quarter of a cent for four years, and the income tax on earnings in excess of $250,000 for seven years. It will generate an estimated $6 billion annually over the next several years, which will be used to boost education funding and balance the state budget through 2019. California's 2012-2013 budget assumes passage of this measure, and had it failed, the budget included automatic spending reductions.
Proposition 38 also would have increased taxes to fund education, but it was rejected by voters. This proposal left the sales tax alone, but raised income taxes on a sliding scale for all but the lowest earners.It would have dedicated most of the revenue to education, preK-12 in this case, and like Proposition 30, also addressed some of California's broader budget woes by paying down state debt for four years.
Proposition 39, approved on Nov. 6, changes the way multistate businesses are treated under California's tax laws. Presently, a company that operates in multiple states including California can choose a tax liability that is favorable to their interests. Under Proposition 39, such businesses will be required to to calculate their California tax liability based upon their sales in the state of California. It is estimated that this change will increase revenue by an estimated $1 billion each year. For the first five years after passage, half of that will go into a new Clean Energy Job Creation Fund. That fund could be used for energy efficiency and alternative energy projects, and job training for jobs related to energy efficiency and alternative energy. A significant chunk of the remaining funds will go toward funding education.
When voters are confronted with competing measures on the ballot together, as in the case of Propositions 30 and 38 this year, they very often end up rejecting both. Governor Brown's association with Proposition 30, along with the measure's position at the top of the ballot, likely lent it enough credibility to overcome this historical trend.
Proposition B, rejected by voters, would have increased tobacco taxes, bringing in an additional $283-$423 million each year. The funds would have gone mainly to K-12 education and higher ed. Tobacco tax increases tend to be fairly popular among voters, but Missouri voters rejected another proposed tobacco tax increase back in 2006. That measure, Amendment 3, would have given the money to boost health care services for low-income residents.
Measure 85 was approved by voters and willredirect the "corporate kicker" revenue to K-12 education. Oregon has a revenue cap, meaning the state can only keep revenue it brings in up to the cap. Any revenue collected in excess of that amount has to be refunded to individual and corporate taxpayers. Under Measure 85's provisions, the state will stop refunding excess revenue to corporate taxpayers, and instead direct that revenue to education. It is difficult to estimate the fiscal impact of this proposal, since it is unclear how the economy will perform in future years. The state estimates, however, that if the provisions of Measure 85 had been in effect over the past 10 budget periods, increased funding for education would have ranged from $101 to $203 million in each of three of these periods.
Initiated Measure 15 would have increased the state sales tax from 4 percent to 5 percent, splitting the new revenue between K-12 education and Medicaid. It failed to pass on Nov. 6.
Tax Increases on the 2010 Ballot
Voters delivered a resounding "no" to all proposed tax increases in 2010. The list that year included:
California's Proposition 21: This would have imposed an $18 surcharge on vehicle registrations. The revenue, an estimated $500 million annually, would have gone into a new State Parks and Wildlife Conservation Trust Fund. As much as $200 million of the new revenue would have replaced current spending, providing a savings to the state general fund. REJECTED
California's Proposition 24: This initiative would have repealed tax changes enacted by the legislature in 2008 that benefit business. It would have increased state revenues by $1.3 billion annually beginning in 2012-2013, and by smaller amounts in years before that. REJECTED
Georgia's Amendment 2: This legislative referendum would have added a $10 fee to vehicle registrations and directed the new revenue toward improving the state's trauma care. REJECTED
Washington's Initiative 1098: This initiative would have imposed a 5% tax on incomes of more than $200,000 for single filers and $400,000 for joint filers. The official fiscal impact statement for I-1098 estimates that passage of the measure would have brought in $11.16 billion over the next five years. $250 million of that would have offset the loss created by an increase in the business and occupation tax credit. Another $383 million would have offset a cut in the state property tax. The remainder would have funded health and education programs. REJECTED
Tax Increases on the 2008 Ballot
Voter response to proposed tax increases in 2008 was mixed. Key proposals that year included:
Colorado's Amendment 51: Sales tax increase to fund services for people with disabilities. REJECTED
Colorado's Amendment 58: An initiative that would have eliminated an existing natural resources severance tax credit and allocate increased severance tax revenue to fund specific programs. REJECTED
Florida's Amendment 8: A legislative proposal that would have allowed counties to levy a sales tax to fund community college. REJECTED
Minnesota's HF 2285: A legislative proposal that established a new 0.38 percent sales tax to fund natural resources & the arts. APPROVED
Montana's LR 118: A legislative proposal to continue the 6-mill levy to support state university system; $12.5 million in 2007, increasing by an average of 3.36% annually. APPROVED
Statewide Votes on Tax Increases, 1992 - 2012
Since 1992, there have been 75 statewide votes on proposed tax increases. Voters have approved 27 of the 75, or 36 percent of the total. Voters seem to be slightly more receptive to tax increases that benefit education, however. Twenty-two of the 75 proposed tax increases over the past two decades would have directed some or all of the new revenue to education, and nine of those were approved. That's about 41 percent, a slightly higher percentage than that of all proposed tax increases.