Just Taxes Blog by ITEP

State Rundown 11/8: Top Tax Takeaways from Tuesday

State Rundown 11/8: Top Tax Takeaways from Tuesday

November 8, 2018

Meg Wiehe
Meg Wiehe
Deputy Director

Tuesday’s elections shook up statehouses, governors’ offices, and tax laws in many states, and in this week’s Rundown we bring you the top three election state tax policy stories to emerge. First, voters in Kansas and other states sent a message that regressive tax cuts and supply-side economics have not succeeded and are not welcome among their state fiscal policies. Meanwhile, residents of many other states, including most notably Illinois, voted for representatives who reflect their preference for equitable, sustainable policies to improve their state economies through smart public investments and improve the lives of all residents through progressive tax structures. Lastly, while some states missed opportunities in this election to make similar improvements, such as new limitations on taxes in ArizonaFlorida, and North Carolina, this week’s elections sent a broad message that voters care about sound fiscal policy in their states. 

— MEG WIEHE, ITEP Deputy Director, @megwiehe 

Not in Kansas Anymore: The Rejection of Failed Conservative Tax Policies 

  • KANSAS’s Governor-Elect Laura Kelly ran and won on an anti-Brownback tax policy platform. Throughout the campaign, she brought the conversation back to the devastation caused by failed supply-side economic policies on the state budget, credit ratings, and critical public priorities like investments in public education. And voters agreed. Kelly’s victory marks the third major referendum against conservative tax policies in the last two years in the state, following the repeal of tax cuts for businesses and the wealthy in 2017 and the remaking of the composition of the state legislature in 2016. The message is clear—Kansas is no longer home to regressive policies that slash taxes for the rich and businesses and raise them on those with fewer means.  
  • Voters in OREGON and CALIFORNIA similarly rejected conservative tax policies that would strip the state of revenue sources and secure tax breaks for businesses and the wealthy. California voters rejected Proposition 6 that would have eliminated a recent gas tax increase and jeopardized billions of dollars of state infrastructure improvements. They also voted down Proposition 5, which would have continued to provide a special tax break for older wealthier property owners at the expense of younger property owners and local public investments. In Oregon, voters rejected Measure 104, which would have made it more difficult to eliminate costly and ineffective corporate loopholes. They also rejected Measure 103, which sought a special carveout of soda and food from future taxation.   

Illinois and the Path to A More Progressive Tax Policy Future 

  • Taxes were a key issue in the ILLINOIS gubernatorial race, with current Gov. Bruce Rauner and Governor-Elect J.B. Pritzker having very different visions for the state. Pritzker campaigned on progressive tax policies, most notably enacting a graduated personal income tax structure where those with lower incomes pay lower rates and those with higher incomes pay higher rates.  While the path to enactment requires many procedural steps due to needing to amend the state’s constitution, with greater political alignment in the state legislature and governor’s office, a more progressive tax system in Illinois might just be on its way. 
  • Illinois will not be alone as the political environment became a lot more amenable to supporting progressive tax policies across the states. Many newly elected governors and lawmakers in states including CALIFORNIACOLORADOHAWAIIMAINEMICHIGANMINNESOTANEVADANEW HAMPSHIRENEW MEXICONEW YORKPENNSYLVANIA, and WISCONSIN are likely to champion proposals that both address the upside down nature of their tax codes and raise new revenue to invest in their communities and residents.   

Missed Opportunities 

Unfortunately, a handful of states across the country missed opportunities to improve (or at the very least, not worsen) their tax systems. This ranged from taking steps to tie the hands of legislators, limiting their options to raise revenue going forward, to saying “no” to progressive tax policies and candidates that would have both helped fund key priorities and made their tax codes more equitable. A few examples include: 

  • ARIZONA voters approved Proposition 126, becoming the second state (after Missouri) to ban sales taxes on services. This is a disappointing move, especially given the state’s difficulty raising much-needed revenue for key services and the nation’s continued economic shift toward the service sector.  
  • North Carolinians also voted to tie the hands of future legislators. The constitutional ballot initiative to lower the state’s income tax cap to 7 percent was approved. A well-designed personal income tax remains one of the best tools states have to make their tax systems more equitable. This move caps the revenue raising potential of the income tax and places limits on how much NORTH CAROLINA can ask of its highest income earners.
  • FLORIDA voters also approved an initiative that will require a supermajority of lawmakers’ approval to raise new revenue, making it harder to address the state’s regressive and inadequate tax structure going forward. 
  • COLORADO voters said “no” to a ballot initiative to raise income taxes on those earning over $150,000 a year to fund improved investments in education. Support for Amendment 73 came in higher than the two previous efforts to raise education funding at the ballot (the only way to raise taxes in the state due to the Taxpayer Bill of Rights) and fared better than another measure on the ballot to raise sales taxes, but not high enough to pass. The broad coalition backing the measure is eager to continue the ripe conversations about improving schools and teacher pay via more equitable and adequate tax policy.   
  • With the help of the big oil companies, WASHINGTON voters turned down a third attempt to enact an aggressive state climate change policy, rejecting a carbon fee that would have raised $1 billion to fund conservation projects, support a more sustainable energy economy, and offset the regressive impacts of the tax in struggling communities. The opposition campaign to I-1631 was the wealthiest ballot campaign in the state’s history. The need for action on climate change isn’t going away anytime soon, so despite this momentary setback, expect more action on this in the future.   
  • The past couple of years have been ripe with opportunity for progressive tax policy in ALASKA. Both Gov. Bill Walker and leaders in the Alaska House acknowledged the need for the state to diversify its tax base and identified that reinstating a personal income tax would be an equitable way to do that. However, the result of this week’s election may take an income tax off the table in Alaska for now. Unlike Gov. Walker, Governor-elect Mike Dunleavy opposes the implementation of a personal income tax. 

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