State Rundown 11/07: Election Week and New Special Sessions

Tax policy results are mixed across the country as many voters weigh in on state and local ballot measures. For example, Washington state voted to maintain its new progressive tax on capital gains; Georgia voters capped growth in property tax assessments; Illinois voters approved a call for a millionaires’ tax; North Dakota voters rejected property tax elimination; and Oregon voters rejected a new minimum corporate tax tied to cash payments.

A couple of common themes did emerge. For instance, state and local investments in shared priorities remain an important connective tissue with voters approving more than $40 billion for state and local transportation needs alone. Meanwhile, ballot measures permitting public dollars to fund private schools – including through the tax code – were defeated. Both Kentuckians and Nebraskans decisively rejected measures that would have funded private schools at public schools’ expense. They join Coloradans, who likely rejected a similar measure by a narrower margin.

In non-election-related news, Louisiana lawmakers headed into a tax-focused special session this week with major changes under consideration.

Major State Tax Proposals and Developments

• LOUISIANA began its special session on tax reform this week. The session, called by Gov. Jeff Landry, seeks to replace the state’s progressive personal income tax rates with a 3 percent flat tax while increasing the state’s standard deduction. To pay for this $1.3 billion personal income tax cut – alongside cuts to the corporate income tax and elimination of the state corporate franchise tax – the governor proposed expanding the sales tax to services and digital goods, eliminating sales tax exemptions, and renewing 0.45 cents of the sales tax that is set to expire next year. Despite these changes, the package is still projected to cost the state $740 million annually in the coming years. On top of this lost revenue, the changes would worsen the state’s already regressive tax system. — NEVA BUTKUS
• Voters in GEORGIA approved two changes to property taxes. The first constitutional amendment caps property tax assessments to inflation. Municipalities will have a short time period to opt out. The amendment also allows municipalities to raise sales taxes by 1 percentage point to replace property tax revenue. Additionally, voters approved an increase to the exemption on tangible personal property – such as farm equipment – from $7,500 to $20,000. — NEVA BUTKUS
• ILLINOIS voters approved an advisory referenda (in less wonky terms, voters approved the idea of a referendum) to raise taxes on households with annual incomes over $1 million by 3 percentage points. The money raised would be used to lower property taxes. — NEVA BUTKUS
• NORTH DAKOTA voters rejected a measure that would have ended local property taxes and forced the state to provide an estimated $3.15 billion in replacement revenue to local governments. After the measure’s failure, Governor-elect Kelly Armstrong promised to make property tax cuts a major priority once he takes office. — MILES TRINIDAD
• WASHINGTON state’s innovative Capital Gains Excise Tax on the sale of certain assets like stocks and bonds, having already survived state and federal legal challenges, has now also easily overcome a repeal effort with 63 percent of voters supporting the highly progressive tax and the funding it provides for schools and childcare. — DYLAN GRUNDMAN O’NEILL

State Roundup

• Lawmakers in Anchorage, ALASKA are discussing the prospect of a new city sales tax, which would fund public works projects and allow for property tax cuts.
• ARIZONA’s 479, which will extend Maricopa County’s half-cent transportation funding sales tax another 20 years, received more than 60 percent of the vote.
• Another tax-related ARIZONA ballot measure, 312, is expected to pass as well. The proposition will allow property owners to apply for property owners if their locality fails to enforce illegal camping and loitering laws.
• COLOARDO voters approved a measure that will levy a 6.5 percent excise tax on firearms and ammunition. The plan is projected to generate $39 million a year and will fund health programs and support services for crime victims.
• KENTUCKY voters soundly rejected a measure that would have permitted public funds—including through the tax code—to be provided to private schools. Roughly 65 percent of voters opposed the measure.
• NEBRASKA voters shut down the legislature’s latest attempt to divert public tax dollars to private schools through a new scholarship program.
• NEVADA voters chose to become the 20^th state to exempt diapers from the sales tax.
• OREGON voters rejected a Measure 118 that would have increased the minimum corporate tax on businesses that have sales above $25 million and distributed the revenue as a rebate to every resident in the state, with the first rebates estimated to be between $1,035 and $1,286. Some opponents highlighted concerns that the rebate would divert existing revenue that currently funds education, healthcare, transportation, and other government programs.
• After the New Progressive Party (PNP) won the governorship and likely majorities in both legislative chambers PUERTO RICO’s adoption of the global minimum tax negotiated by the Organization for Economic Development and Cooperation (OECD) is at risk. The agreement requires a minimum tax of 15 percent on corporate profits and allows nations to tax foreign profits that were taxed under 15 percent. Because of Puerto Rico’s very low corporate taxes, the commonwealth could lose out on up to $3.5 billion in potential revenue.
• SOUTH DAKOTA voters rejected Initiated Measure 28 that would have exempted groceries from the state’s sales tax. Some of the opposition to the measure raised concerns that legal litigation could have expanded the exemption to beyond just groceries. The measure would have exempted products that are meant for “human consumption,” but that could apply to beyond food and drink, such as tobacco and vapor products that are also intended for human consumption.
• Salt Lake City, UTAH residents decided to keep the Zoo, Arts and Parks (ZAP) tax for another 10 years. The tax, which is a 0.1 percent sales tax collected by the county, supports parks and recreation facilities.
• WYOMING voters approved a constitutional amendment that will isolate residential real estate from other forms of property for tax purposes.

What We’re Reading

• ITEP posts on state and local ballot measures have been updated with final results.
• Helpful overviews of election results and takeaways for state tax issues, legislative races, and beyond are available via Governing, Route Fifty, Stateline, and States Newsroom, to name a few.

If you like what you are seeing in the Rundown (or even if you don’t) please send any feedback or tips for future posts to Aidan Davis at [email protected]. Click here to sign up to receive the Rundown via email.

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