On Revenues and Referenda: Important Tax Questions on Local Ballots, Too

Our “Revenues and Referenda” has so far focused on key state-level tax-related questions facing voters on Election Day. But many cities, counties, and school districts are posing questions to their residents Tuesday as well. Below we highlight some trends across states and a few of the more interesting local ballot questions.

The strongest nationwide trend in local ballots is that in many cases, local governments are asking voters to create or raise local taxes to fill in for state funding that has been cut in recent years, often largely due to short-sighted tax cuts enacted at the state level. For example, state support for K-12 schools remains below pre-recession levels in at least 23 states and the largest school funding cuts have often correlated with major income tax cuts.

Ohio is a case study in state-level tax slashing forcing costs onto localities that are now having to ask voters to approve local taxes to keep vital services afloat. The state eliminated its estate tax beginning in 2013.Eighty percent of its revenue went to cities and villages. Then the state cut its Local Government Fund in half as part of efforts to fill a budget shortfall caused by tax cuts. These and other measures have cut funding for local services by at least $1 million each in more than 70 Ohio cities. Twenty-seven Ohio cities and villages will seek local income tax increases, and most of them cite the state cuts as a primary reason. The measure in Cleveland, for example, would raise about $80 million to fund reforms in the police department and prevent layoffs.

Voters in Olympia, Washington, will consider enacting a local income tax of 1.5 percent on income over $200,000. This would raise $3 million to help local high school graduates and GED recipients attend community college or public university. The measure would also create the only income tax in Washington State.

State transportation and infrastructure funding has suffered as well, often due to failure to modernize state gas and sales taxes, and again some local entities are taking matters into their own hands. According to the Center for Transportation Excellence, “2016 will be a record-breaking year for transportation ballot measures. There will be 70 ballot measures in the United States” that could raise a combined $175 billion. Several California cities, for example, are voting on sales tax increases to pay for local transportation needs. Voters face similar questions in the Atlanta, Georgia, area.

Other localities are attempting to expand their tax bases rather than increase rates, most notably by taxing sugar-sweetened beverages. Three California cities and Boulder, Colorado, are among localities attempting to tax soda-pop.