Tax Analysts Blog

Tax Ballot Predictions

Posted on Oct 22, 2014

States have several tax-related ballot questions slated for November. Here they are, along with my musings:

Massachusetts voters will decide whether to repeal the state's inflation adjustment to its gasoline tax (Question 1). The adjustment causes the tax to go up every year. That could be a good thing. The gas tax is the only good way to pay for roads, and politicians are always shy about increasing it. The problem in Massachusetts is that lawmakers use the gas tax to pay for things other than roads, which makes an inflation-adjusted gas tax awful. In an ideal world, politicians would increase or decrease the tax as needed to maintain the roads. Thus, I would vote for repeal, and I think the citizens of Massachusetts will agree.

Tennessee voters will decide whether to enshrine their anti-income-tax policies in their constitution (Amendment 3). Tennessee has no broad-based personal income tax, and proponents of the measure want to keep it that way forever. I'm not sure it matters, because there's no chance the state will adopt an income tax in the foreseeable future. I'm always a little nervous about saying never or always; there may come a time when adopting an income tax makes sense. I do not like income taxes, but I would vote no on this measure. Tennesseans will say yes.

Georgia voters will vote on a similar income tax limitation in November and decide whether to prohibit increasing the top marginal income tax rate above whatever it is on January 1, 2015 (Amendment A). Again, I think this is unnecessary. The top tax rate hasn't been increased in 30 years, and there's no chance of it happening anytime soon. Who knows if it may be necessary someday. I would vote no, but I'm pretty sure Georgians will say yes.

Nevada voters will decide whether to adopt a 2 percent margin tax to support schools (Question 3). The tax is a terrible idea for several reasons. First, it's basically a gross receipts tax and is imposed regardless of profit, so you can have lots of revenue, no profit, and still be hit with a tax. That's neither fair nor encouraging to business development. Second, the tax will give taxpayers the option of calculating their burden by either taking 70 percent of total revenue, total revenue minus compensation, or total revenue minus cost of goods sold. The taxpayer chooses the formula. Everyone will pick the formula with the lowest burden, of course -- but all any of that means is full employment for tax lawyers and accountants. Optional methods for calculating tax are almost never a good idea. A bigger problem with the tax is that the first million dollars is exempt. That's good for start-ups. But if you make $1 million dollars and 51 cents, you pay tax on the entire amount. That's crazy. It's a bad tax. I predict Nevadans will be swayed by arguments that the tax will hurt economic growth and say no.

Illinois voters will decide whether to impose a 3 percent surtax on incomes over $1 million in order to support schools (HB 3816). The ballot measure is advisory only and won't bind anyone. There are many folks -- namely, the teachers' unions -- who would like nothing better than to stick it to the rich to bolster education finance. Nothing says we really care about schools more than having some rich minority pay for them. I don't make $1 million a year, although my family wishes I did. I'd vote no, but I predict Illinois voters will say yes.

Read Comments (4)

edmund dantesOct 22, 2014

"I'm not sure it matters, because there's no chance the state will adopt an
income tax in the foreseeable future."

The foreseeable future lasts only until the election is over, unless this
measure passes.

I well remember a similar argument being raised against an amendment to the CT
constitution prohibiting an income tax. The amendment was "unneeded." Why
"clutter up" the constitution with "unnecessary" amendments?

Needless to say, the amendment failed. In the next governor's race, Lowell
Weicker ran against the income tax, saying it would be like throwing gasoline
on a fire. Sure enough, within 2 years we had an income tax, and the CT
economy began its long trajectory down.

Initially tax revenues exploded, so government spending exploded right along
with it. When revenue plateaued, CT was able to borrow massive amounts in the
credit markets to avoid spending cuts, backed by their new revenue source. Now
we have higher per capita government debt than even California! This anchor
has given us the worst performing state economy in the union, per a recent NPR
report. We also never used the tax revenue to fund our pension promises.

Tennessee voters would be wise indeed to enshrine an income tax prohibition in
their constitution.

david brunoriOct 23, 2014

Mister Dantes,

I do not disagree with your post. I am no fan of the income tax, particularly
the kind with high marginal rates. While your examples are valid, the folks in
Connecticut could have, indeed still could, repeal the tax. They have chosen
not to. I guess I want to believe, naively perhaps, that people and their
leaders will view the tax system as I do. In that world, there may be a need
for income taxes, even high income taxes. But that would be a very rare
occurence.

edmund dantesOct 23, 2014

"the folks in Connecticut could have, indeed still could, repeal the tax."

I take it you do not live in Connecticut, which is effectively a one-party
state. If the CT voters could vote in a referendum, yes, the income tax would
be repealed. We do not have that opportunity, and we will never have that
opportunity. Democrats would never, ever consider a repeal, and will work all
the levers of power to keep such a repeal out of discussion. Republicans here,
such as they are, are too weak willed and near-sighted to even raise the idea.

High-income taxpayers are fleeing the state, so those who might work for an
income tax repeal are already gone. The CT business environment is so bad that
we are reduced with bribing big firms to stay with special tax abatements,
shifting the sky-high tax burden to the rest of us. Latest example is UBS,
which got $20 million in 2011 to stay in Stamford and has now put its building
on the market.

Our current Governor Malloy ran on a pledge to not raise taxes. He promptly
pushed through the biggest tax increase since the income tax was adopted. He's
running again on the big lie of no more tax increases, so we are all wondering
which taxes will go up next.

Your belief in grass-roots democracy is touchingly naive. There *was* an
attempt at grass roots democracy called the Tea Parties, and both Democrats and
establishment Republicans worked overtime to demonize the movement and
neutralize it. They succeeded. How could they not, when they could enlist the
potent ammunition of the IRS?

Jay StarkmanOct 23, 2014

"[Georgia's] top tax rate hasn't been increased in 30 years, and there's no
chance of it happening anytime soon." The last rate change was 40 years ago
when the top 7 percent rate (on income over $20,000) was stricken under then
Governor Jimmy Carter. Otherwise, Georgia's antiquated income tax rate
structure dates back to the 1930s (graduated, with a top 6 percent over
$10,000).

Today, there is a tight gubernatorial race between incumbent Nathan Deal (who
has ethics issues) and Jimmy Carter's grandson, Jason Carter. Carter's main
campaign issue is education and he has not explained how he proposes to fund the
massive extra spending.

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