Tax Proposals on the Ballot this Election Season

Ah, fall. The season marks the countdown to that quintessential American holiday, where childish figures go door-to-door, asking for favors under false pretenses. I am of course talking about election season, which traditionally kicks into high gear in October.

This year, voters in states across the nation will have the opportunity to make their voices heard on a number of ballot initiatives regarding taxes. In some states, ballot initiative supporters are seeking to limit tax policy choices available to lawmakers, while ballot initiatives in other states would raise revenue to boost school funding. We’ve compiled a few of them here, along with links to the best resources, to help voters understand the issues and make their decision this November.

Georgia voters will decide the fate of a constitutional amendment that would prohibit the state from increasing the top marginal income tax rate above the rate in effect on Jan. 1, 2015. While the legislature is now adjourned until 2015, a special session could theoretically be called to lower the top rate (now at 6 percent) before Jan.1. Supporters of the measure argue that its passage would make the state more competitive and reduce uncertainty over fiscal policy for businesses interested in investing in Georgia. Opponents say the uncertainty argument is bogus since the state hasn’t raised the income tax since the 1980s, and that businesses and residents choose where to locate based on a number of factors other than income tax rates. They further note that states that have passed similar measures have faced fiscal challenges down the road; Illinois and California, both of which have restrictive tax amendments in their constitutions, have been hamstrung by budget deficits and an inability to raise revenue during economic downturns.

Massachusetts voters have the option of repealing a 2013 law that ties the gas tax to inflation, allowing for automatic gas tax increases each year. The law also includes a minimum cap on the state gas tax, to prevent gas tax decreases due to deflation. Supporters of repeal argue that the law is a slippery slope that could lead to the linkage of other taxes to inflation, and that it unfairly allows legislators to raise taxes “through the back door” without having to answer to voters. They also argue that the state has a spending problem, not a revenue problem; the last time the state raised the gas tax for road repairs, the money was diverted to other purposes. Opponents of the ballot measure say it would jeopardize transportation projects across the state, threatening the safety of Massachusetts drivers and contributing to the deterioration of many roads and bridges. 53 percent of the state’s bridges are structurally deficient or functionally obsolete, and bad roads cost Massachusetts drivers $2.3 billion a year in car repairs. In the past, ITEP has argued that gas tax indexing is good policy since it maintains a state’s purchasing power and creates a stable funding source – read more in our comprehensive gas tax report.

Tennessee voters could enshrine the state’s current lack of a broad-based personal income tax in the state constitution. A ballot question would permanently ban the legislature from enacting a general income tax on wages and salaries by state or local governments. Supporters argue that the measure would make the state more attractive to businesses by reducing uncertainty and locking in Tennessee’s status as a low-tax state. Opponents argue the measure will make it harder for future Tennesseans to deal with economic downturns and that the state’s political climate makes the imposition of an income tax unlikely in any event. For more on Tennessee, check out this recent blog post.

Nevada voters could implement a new 2 percent margins tax on businesses with over $1,000,000 in revenue to support public schools. Supporters argue that Nevada is 49th in per-pupil spending while also maintaining the lowest state corporate taxes in the nation; since 2009, the state has cut education spending by $700 million. The also maintain that 87 percent of businesses would be unaffected by the measure, and that revenues raised would go solely to education spending. Opponents claim the measure would increase the cost of doing business in the state, would hurt thousands of small businesses, and that the revenue raised would go to county bureaucrats instead of classrooms. The AFL-CIO, which initially supported the measure, now opposes it on the grounds that it could cost some Nevadans their jobs and raise the cost of living if businesses cut costs or pass the tax on to consumers.

Illinois voters will decide whether to support an additional 3 percent surtax on income over $1,000,000 to provide more funding for school districts based on student population. The ballot measure is an advisory question, so it will not be legally binding. Supporters argue that the best-off Illinoisans should do more to support the public schools, which are chronically underfunded. Opponents argue that the measure is an election-year gimmick meant to boost the performance of Democratic candidates rather than a serious proposal. They also argue that the state raised taxes substantially just a few years ago and still cut education funding, and that the tax will lead to tax flight by the wealthy. For the record, tax flight is a myth.