November 10, 2022
November 10, 2022
As states continue to tally the remaining votes and the news stories roll out at a breakneck pace, the unofficial results of the 2022 midterm elections have brought with it significant changes across the state tax policy landscape. Massachusetts voters took a major step forward in the name of tax equity after approving the ballot initiative commonly known as the ‘Fair Share Amendment.’ The constitutional amendment will impose an additional 4 percent surcharge on incomes over $1 million and raise over $2 billion for education and transportation projects. As ITEP’s Marco Guzman notes in a recent blog on the ballot measure, “At a time when states are using temporary revenue surpluses to make deep, permanent tax cuts, Massachusetts stands out as a state that has decided to focus on the long-term growth of its economy and residents.” Voters in West Virginia also rejected an irresponsible tax plan that would have given the state legislature the authority to slash property tax revenues. In Colorado, however, voters approved a cut to the state’s flat tax, in addition to reducing income tax deductions for certain taxpayers to fund a school meals program. Meanwhile, in Arizona, a measure that would impose a supermajority requirement for passing new taxes through the ballot process is trending in the direction of being approved. The Grand Canyon State will join roughly nine other states that have similar, arbitrary requirements on the books.
For a more thorough breakdown of the tax changes made at the ballot on Tuesday, read Jon Whiten’s recent piece from ITEP: Election Day in the States: Voters Deliver Important Victories for Tax Justice.
Major State Tax Proposals and Developments
- With 52 percent of the vote, MASSACHUSETTS voters scored a major victory for tax fairness when they approved Question 1—also commonly referred to as the Fair Share Amendment—which will impose an additional surcharge on filers earning over $1 million to help fund education and transportation improvements.
- COLORADO voters will see the state’s flat income tax rate reduced from 4.55 percent to 4.40 percent after Proposition 121 was approved. Voters also approved a measure that will extend an existing property exemption and another that will eliminate income tax deductions for certain taxpayers to fund a free meals program for schools.
- WEST VIRGINIA voters rejected Amendment 2, which would have permitted the legislature to reduce property tax revenues by up to $515 million, by a wide margin. Corporate inventory, machinery, and personal vehicles will continue to be taxed.
- ARIZONA Proposition 132, which would require a supermajority to approve new taxes via the ballot process, is trending in the direction of being approved, as ‘yes’ votes currently lead by a small margin with 70 percent of the vote counted.
- Additionally, while not officially certified, ARIZONA Proposition 130, has been approved by voters. The measure will consolidate the state’s property tax exemption statutes and allow the legislature to set exemption amounts and qualifications.
- CALIFORNIA voters rejected Proposition 30, which would have raised taxes on high income earners to fund electric vehicle subsidies and fire prevention.
- In CONNECTICUT, lawmakers may meet before their regularly scheduled session to enact further tax cuts for struggling families. Other post-election priorities for legislators and Gov. Ned Lamont include making this year’s temporary Child Tax Credit permanent and possibly extending the gas tax holiday beyond the end of the year.
- In HAWAII, current Lieutenant Governor Josh Green was elected to succeed outgoing Governor Daivd Ige. He wants to tax vacant land as one of the ways to combat rising housing costs.
- MISSOURI voters approved legalizing recreational cannabis, which will be taxed at 6 percent. Revenues will be used to fund a veterans, health and community reinvestment fund, addiction treatment services, the state’s veterans commission and public defenders.
- NEBRASKA voters approved an initiative to increase to the minimum wage to $15 by 2026 and adjust it for inflation thereafter, a tremendous win for the state’s residents and economy. Another issue facing the legislature in the upcoming session is business tax subsidies that continue to drain state revenues without delivering their purported economic benefits.
- NEW YORK CITY residents overwhelmingly approved three measures relating to racial equity. The passage of Proposal 2 will task the mayor and all agencies with producing racial equity plans, and will also establish an Office of Racial Equity and Commission of Racial Equity charged with helping hold the city accountable to those plans, among other things. Given the increasing awareness that taxes and racial justice intersect in important ways, this puts the city in position to be at the forefront of implementing tax policies that do more to advance racial equity.
- PENNSYLVANIA Gov. Tom Wolf signed several tax bills into law, including the $2 billion tax credit package intended to incentivize investments in the state by hydrogen producers, milk processors, and semiconductor manufacturers. Other laws include exempting land bank property transfers from state and local realty transfer tax, and increasing Philadelphia’s net operating loss carryforwards from three years to 20 years for corporate income, individual income, and trust income tax.
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