Americans for Tax Reform Guide to 2012 Initiatives & Referenda
While much of the media attention has been focused on the presidential race and the country’s most high profile gubernatorial and senate contests, there are some very important issues that will be put before voters on Nov. 6th.
From coast to coast there are ballot measures that would both raid and protect taxpayer pocketbooks and increase the power of government employee unions to raid state coffers. ATR has assembled a list of the top tax measures on statewide ballots this year and listed ATR’s recommendation to voters.
Also known as the "Business Privilege Tax" amendment, this measure will continue to allow the legislature to levy a business privilege tax on corporations and other entities. Americans for Tax Reform urges voters to vote “NO” on Amendment 7.
The “Arizona Property Tax Break for Business Equipment Amendment” is aimed at providing tax relief to employers who are purchasing new machinery as well as encouraging employers to use that relief to hire new employees to operate the machinery. Under current Arizona law, the first $68,079 of machinery value is exempt from taxation. The passage of Prop. 116 would raise the exemption to an amount equal to the average annual earnings of 50 workers, estimated at $2.4 million.
As Arizona recovers from the economic recession, it is estimated that small businesses will provide roughly two-thirds of all private sector jobs. Raising the exemption for business equipment purchases would provide the much needed boost in job-creating capacity that small businesses need to begin hiring workers again. Americans for Tax Reform urges a “YES” vote on Prop. 116.
While this proposition would not prevent local taxing authorities from raising property taxes directly, the “Arizona Property Tax Assessed Valuation Amendment” would simplify the Arizona property tax system and prevent taxing authorities from inflating the value of property in order to increase property tax liability. Prop. 117 would cap annual assessed value growth to a maximum of five percent, meaning that the annual assessed value of a property can only grow at five percent each year. This will protect taxpayers from dramatic increases in property valuations that lead to significant tax increases.
Proponents of Prop.117 say that the amendment would simplify one of the most complicated property tax systems in the country and provide much needed transparency to property value assessment. By capping the annual increase in assessed value, Arizona taxpayers will be able to avert another situation, like that which occurred between 2004 and 2009, which saw dramatic increases in property tax hikes. Had the five percent limit been in place over the last decade, it would have prevented $33 billion over-assessment of property value. Americans for Tax Reform urges a “YES” vote on Prop. 117.
Prop. 204 would renew a one cent sales tax, which was originally championed by Governor Jan Brewer. It is important to note that Governor Brewer has come out against extending the sales tax.
Proponents of Prop. 204 argue that the taxes collected by extending the one cent sales tax increase would go to education funding. However, the Goldwater Institute has revealed that the nearly $1 billion a year sales tax increase will not go to a dedicated fund for education. In fact, at least 20 percent of the money will go to special interest programs and infrastructure projects. The Goldwater Institute additionally notes that currently almost half of Arizona’s state budget is dedicated toward education spending. They calculated that Arizonans spend $9,200 per student per year, yet according to this year’s Arizona Auditor General report, only 55 cents of every school dollar makes it into the classroom.
In 2000, Arizonans passed a sales tax increase to boost education funding. That promise was never kept. This election, Arizona voters will have a similar choice between extending a sales tax increase that will leave Arizona with the second highest sales tax in the country, hurt small businesses and retail, and create a slush fund for special interest spending. Americans for Tax Reform urges a “NO” vote on Prop. 204.
Arkansas already has the 6th highest combined state & local sales tax in the nation. Issue 1 would increase the sales tax by an additional half-cent in order to push more taxpayer dollars into highway funding. A large number of spending interests have lined up in support of Issue 1, hoping to get a large windfall in taxpayer dollars if the measure is passed. The fact is that Arkansas has a spending problem, not a revenue problem. The state legislature should focus on getting the state’s fiscal house in order before going to the voters and demanding another tax increase. If highway funding is a high priority for Arkansas lawmakers, they should fund it with existing revenue. By claiming that a tax increase is needed, they are admitting that highway funding is actually their lowest priority. Americans for Tax Reform urges a “NO” vote on Issue 1.
Prop. 30, Gov. Jerry Brown's tax increase ballot measure, would do the following: 1) raise state sales tax to 7.5 percent from 7.25 percent, 2) create three new upper income tax brackets, which would give the state the highest income top marginal income tax rate in the country at over 12 percent. Currently, only incomes exceeding $1 million pay a 10.3 percent tax. The new tax brackets and rates are to stay in effect for seven years and can be reauthorized.
Brown’s ballot measure is more of the same that got California into its current fiscal conundrum: more taxes and no real reforms that put state spending on a sustainable path. In fact, Brown’s tax hike will be a double whammy to small businesses, since many file under the personal income tax system and will therefore see their job-creating capacity reduced by Gov. Brown’s income tax hike. Small businesses would get hit again with Brown’s sales tax hike, as they face disproportionate compliance costs compared to larger companies.
PricewaterhouseCoopers conducted a 2004 survey that was the first national measure of retailers’ sales tax compliance costs. The report found that retailers with less than $1,000,000 in annual sales were burdened with sales tax compliance costs in excess of 13 percent of revenue collected. Meanwhile, retailers with income between $1,000,000 and $10,000,000 saw average compliance costs less than 6 percent and retailers with more than $10,000,000 in sales had compliance costs that were less than 3 percent on average.
It is clear that the problem in California is all on the spending side of the ledger, as the state is already home to some of the highest taxes in the country. As such, Americans for Tax Reform urges voters to vote “NO” on Prop. 30. Even if Brown’s tax hike is approved by voters, it does nothing to rectify California’s structural overspending problem and, not surprisingly, the budget would still be deep in the red.
This important Paycheck Protection initiative would prohibit corporations and labor unions from automatically deducting funds from their employees’ paychecks to be spent for political purposes. Labor unions pose great opposition to this measure, fearing it would eliminate their clout and influence in California politics. Americans for Tax Reform urges voters to vote “YES” on Prop. 32.
This competing income tax increase would raise the income tax rate on most Californians. The funds would be earmarked for education investment. Molly Munger is the main proponent, giving $7.2 million dollars to the "yes" campaign.
It is projected that this measure, if passed, would siphon $10 billion in revenue from the productive economy. Americans for Tax Reform urges voters to vote “NO” on Prop. 38.
A billion dollar per year corporate tax hike, Prop. 39 would direct billions in California taxpayer dollars to Solyndra-like ventures and an array of “green” projects if passed. The fact that Prop. 39 funnels taxpayer dollars to the same sort of projects in which the measure’s sponsor, billionaire hedge fund manager Tom Steyer, is personally invested has raised many eyebrows. More job-killing tax increases in one of the most heavily-taxed states in the union is a bad idea to begin with, but it becomes unconscionable when done to finance self-serving boondoggles, as appears to be the case with Prop. 39.
Prop. 39 raises revenue by eliminating one of the ways in which companies are permitted to calculate their state corporate income tax liability in California. The effect of its passage would be a more than $1 billion per year tax increase on employers in a state with a tax burden so onerous that companies have already begun leaving in droves and taking good jobs with them to places like Florida, Texas, and Tennessee.
It’s bad enough that the U.S. has the highest federal corporate income tax rate in the world, but California lawmakers are inconsiderate enough to pile on with the highest state corporate tax rate in the West and ninth highest in the country. The latest blow from this uncompetitive tax regime was last month’s departure of Samsung from Silicon Valley to the Lone Star State.
Just like the tobacco tax increase that California voters rejected earlier this year, Steyer’s tax hike would do nothing to reduce California’s sizable budget deficit. It would instead be earmarked for increased spending at a time when the state’s books are dripping with red ink and will continue to do so even if Jerry Brown’s income and sales tax hikes are approved by California voters. Americans for Tax Reform urges voters to vote “NO” on Prop. 39.
Propositions 1 and 2:
A yes vote on Proposition 1 would keep in place Senate Bill 1108, which ended public school teacher tenure, eliminated seniority as a determining factor teacher firing decisions, and limited collective bargaining for teachers. The law that approval of Prop. 2 upholds improves the teacher compensation process and saves the state $9.4 million annually.
A yes vote on Proposition 2 would keep in place Senate Bill 1110, which instituted a merit pay system for teachers. The law that voter approval of Prop. 2 would uphold rewards quality teachers with higher pay and institutes a meaningful system for evaluating teachers. Higher costs are offset by other education reforms instituted in 2012.
Americans for Tax Reform urges a “YES” vote on Propositions 1 and 2.
This measure would enhance union powers in two ways. First, it would enshrine private and public sector employees’ collective bargaining rights in the state constitution. Second, it would empower most union contracts to override state and local laws regarding employee compensation, work conditions, and union funding.
On the first point, collective bargaining is already allowed by state and federal law. Under Proposal 2, while no new rights are afforded, the system can only change by way of another constitutional amendment. The legislature would be stripped of the power to make even small changes to public sector collective bargaining privileges.
The most important point is that Prop. 2 would allow collective bargaining agreements to supersede state and local laws. Collective bargaining provisions that address wages, hours, and work conditions will override any state laws dealing with those issues. And Prop. 2 would “invalidate existing or future state or local laws…including employees’ financial support of their labor unions.” That means that laws dealing with government collection of union dues (“paycheck protection”) are out of the question as long as collective bargaining agreements permit those collections.
Proposal 2 is akin to a steroid injection for already powerful government employee unions. Americans for Tax Reform urges voters to vote “NO” on Proposal 2.
Proposal 3 is a constitutional amendment that would mandate that Michigan get 25 percent of its energy from renewable sources by 2025. Known as a “renewable portfolio standard,” this is an inflexible measure that will drive up energy prices while making it very difficult for the state to adapt to advances in energy technology in the future.
While a number of states have renewable portfolio standards on the books, Proposal 3 is unique in that it would enshrine the mandate in the constitution. This will prevent state lawmakers from revising the mandate should its target become unrealistic, or altering the definition of “renewable” should new energy sources come online. There have been massive changes to the domestic energy supply over the past century thanks to research, development, and market forces. Putting a portfolio standard in the state constitution will hamper the state’s ability to deal with inevitable future changes.
But perhaps most important is this measure’s impact on energy prices. Some estimates peg the implementation of Proposal 3 above $10 billion. Those costs will be passed on to Michigan’s energy consumers at a time when they can scarce afford them. Americans for Tax Reform urges a “NO” vote on Proposal 3.
Proposal 5 would require a two-thirds “supermajority” vote in each chamber of the legislature in order to raise taxes. Currently there are 16 states, from conservative Oklahoma to liberal Delaware, with some sort of supermajority requirement on the books. This is an important measure that will put emphasis on spending restraint over easy tax increases to balance the state budget.
Proposal 5 will help keep the growth of state government in check, and impose an additional safeguard against tax hikes. Americans for Tax Reform urges voters to vote “YES” on Proposal 5.
This measure would require voter approval for any new publicly funded international bridge or tunnel. The specific issue at hand is a new government-funded bridge to Canada, funded by the federal government, the Canadian government, and a Canadian loan to the State of Michigan.
This is being billed as “free money” for Michigan, but that is certainly not the case. The $550 million loan from Canada must be paid back with interest, and Michiganders pay federal taxes, which will finance part of the new bridge’s construction.
Furthermore, it is unlikely a new bridge will generate the tolls necessary for the state to ever recoup its costs. The bridge project is already dubious; voters should at least be given the opportunity to weigh in on its construction. Americans for Tax Reform urges voters to vote “YES” on Proposal 6.
Missouri currently has a competitive advantage over neighboring states when it comes to tobacco taxes, because it has a lower rate. However, if passed, Prop. B would place Missouri at a significant disadvantage to other states in the region like, Nebraska, Kansas, Tennessee, and Kentucky, while putting the state on par with Illinois, Iowa, Arkansas, and Oklahoma.
Prop. B would increase the state tobacco tax by about 73 cents, amounting to what could be a $423 million tax increase. Missouri voters should be weary, however, as lifestyle taxes like the tobacco tax rarely live up to their revenue projections. It forces the state to look for other sources of increased revenue to fund spending projects. History has shown that tobacco tax increases are merely a placeholder for future tax hikes on the general populace. Americans for Tax Reform urges a “NO” vote on Prop. B.
New Hampshire Question 1 is a constitutional amendment that “explicitly forbids the Legislature from imposing any new income tax on personal income.” This measure was referred to the ballot by the legislature and requires a two-thirds vote of the people to amend the constitution.
New Hampshire’s lack of income and sales taxes are key drivers of economic growth in the state. As one of nine states with no tax on personal income, New Hampshire is a magnet for job creators. And as the state is situated in the tax-and-spend Northeast, the competitive advantages of limited government are exacerbated.
This is an important safeguard against imposing an income tax in New Hampshire. Americans for Tax Reform urges a “YES” vote on Question 1.
State Question 758:
The “Oklahoma Property Tax Amendment” is a measure aimed at reducing annual increases in property taxes, by reducing the cap on the maximum annual tax valuation increase for homestead properties and agricultural land from five to three percent. This measure will help to bolster the pro-growth economic reforms already being pursued in Oklahoma and encourage more employers to locate within the state. Americans for Tax Reform urges a “YES” vote on State Question 758.
State Question 766:
The “Oklahoma Intangible Tax Ban Amendment” would abolish property taxes on intangible personal property. A 2009 Oklahoma Supreme Court ruling extended the intangible property tax from a few centrally assessed companies to all Oklahoma based businesses. Currently all private sector employers will be assessed property taxes on intangible things such as contracts, philanthropy, patents, trademarks, and customer lists. The intangible property tax places an additional and unnecessary burden on Oklahoma employers and as a result, discourages the hiring of additional workers. Oklahoma small businesses already pay income taxes, sales taxes, and property taxes. The intangible property tax will only encourage businesses to locate outside Oklahoma, taking much needed jobs with them. Only a handful of states currently have an intangible property tax. Americans for Tax Reform urges a “YES” vote on State Question 766.
This measure will phase out Oregon’s death tax. As the movement to end estate and inheritance taxes has swept the country, with Ohio and Tennessee recently ending their death taxes, Oregon has the ability to do the same. The death tax is a form of double taxation that chases families and job creators out of state.
Measure 84 will eliminate a tax that, as the Wall Street Journal put it, “punishes a lifetime of thrift and investment solely due to the accident of death. And it does so in a way that imposes another tax on income that in most cases has already been taxed once, or sometimes twice.”
Abolishing Oregon’s death tax will save taxpayers $120 million annually, but economists have projected that 44,500 jobs will be created and over $94 million in new income taxes generated. This is a no-brainer: The death tax is morally wrong and economically destructive. Americans for Tax Reform urges a “YES” vote on Measure 84.
Initiated Measure 15:
South Dakota ended this fiscal year with $48 million in unexpected revenue, eliminating the need to permanently increase the state sales tax. Initiated Measure 15, however, is an attempt to do just that. This measure would increase the state sales tax from 4 to 5 percent. With tax revenues already coming in well above projections, proponents of the sales tax increase are unnecessarily asking for an additional $180 million per year from South Dakota taxpayers. Americans for Tax Reform urges a “NO” vote on Initiated Measure 15.
Long enshrined as part of Washington state law, a two-thirds majority vote is required of the legislature in order to increase taxes, unless there is ample support in the legislature to suspend the statute. Initiative 1185 is a measure that would reaffirm the two-thirds majority requirement for legislative tax increases. Evergreen State voters re-affirmed the two-thirds majority requirement four times previously in 1993, 1998, 2007, and 2010. If initiative 1185 is adopted, the state legislature would be unable to suspend the statute until 2014. The last time the legislature moved to suspend the two-thirds majority requirement for tax increases (2010), Washington taxpayers were hit with nearly $800 million in tax increases. Americans for Tax Reform urges a “YES” vote on Initiative 1185.
Omnibus Tax Preference Measure:
Washington voters will have the opportunity to make two Advisory Votes regarding tax measures adopted by the state legislature. While Advisory Votes are non-binding, they are a clear method of alerting legislators as to the wishes of the voters. Advisory Vote #1 would advise lawmakers to either repeal or maintain a $170 million business and occupation tax increase. Americans for Tax Reform urges a “REPEAL” vote on Advisory Vote #1.
Advisory Vote #2 would advise legislators to either repeal or maintain a $24 million tax increase on the possession of petroleum products. Americans for Tax Reform urges a “REPEAL” vote on Advisory Vote #2.
This is the first time that Evergreen State voters will be able to weigh in on legislative decisions in this manner. The Advisory Votes are a product of the consultation process enacted by Initiative 960.