Key ballot measures to watch on state taxes
Control of the White House and Congress aren’t the only things at stake in the 2020 elections.
In many states, voters will face various ballot measures, including several that could have profound implications on state and local budgets.
There are at least 30 tax- and revenue-related measures on the ballot in 16 states across the country, according to the National Conference of State Legislatures, sparking fights over property taxes, income taxes and excise taxes.
In several states, voters will decide whether to increase taxes for high-income individuals and businesses — a priority for progressives. In others, voters will decide whether to legalize and tax marijuana sales.
Here are several key tax-related state ballot measures to watch.
California commercial property taxes
One of the highest profile ballot measures would change how commercial property taxes are assessed in California by increasing property taxes for some businesses.
The Golden State’s Proposition 15 would partially roll back restrictions on property tax increases that voters put in place in 1978. This year’s ballot measure, if approved, would require commercial properties valued at more than $3 million to be taxed based on the value at which the properties could be sold, rather than the price for which they were purchased.
A voter guide put out by the California secretary of state’s office said the measure would provide $6.5 billion to $11.5 billion a year for schools and local governments.
The measure is backed by a number of prominent Democratic politicians, including presidential nominee Joe Biden, as well as Sen. Bernie Sanders (I-Vt.) and a number of labor unions. Supporters of Proposition 15 argue it’s targeted at bigger businesses and their high-income owners. They also argue the measure would improve fairness in the state’s tax system since properties purchased years ago have much lower taxes than those purchased more recently.
Opposing the measure are a number of business groups that argue higher property taxes would be passed onto the small businesses renting the properties.
A recent poll released by the University of California-Berkeley found 49 percent of likely voters favor the measure, with 42 percent opposed and 9 percent undecided. The measure needs to receive more than 50 percent support to be approved.
Illinois graduated income tax
Voters in Illinois will decide whether to change the state’s Constitution to allow a graduated income tax rather than a flat tax — a change aimed at raising revenue and making the state’s tax code more progressive.
The ballot measure itself doesn’t establish specific tax rates, but the state legislature last year approved a rate structure that would take effect if the amendment is passed. The new rate structure would result in the highest-income households seeing a tax increase while everyone else would see their taxes go down. The state legislature has also approved an increase to the state’s corporate tax rate that would take effect if the ballot measure passes.
Illinois has a flat income tax rate of 4.95 percent for individuals. If the amendment is approved, there would be six tax brackets: income above $250,000 would be taxed at rates above the flat-tax rate, income between $100,000 and $250,000 would be taxed at the current rate and income up to $100,000 would be taxed at lower rates.
The ballot measure is a priority for Illinois Gov. J.B. Pritzker (D), who has donated millions of dollars of his own money to a group pushing for the measure to pass. It’s also backed by labor groups.
Proponents argue it would result in wealthy individuals paying their “fair share” and would raise revenue that could help fund schools and address the state’s budget deficit.
Critics, including a number of business groups, argue that the proposal would discourage companies from locating and expanding in Illinois.
For the amendment to pass, it needs the support of either 60 percent of those who vote on the ballot measure or 50 percent of those who cast ballots. A survey by NPR and the University of Illinois Springfield conducted in September found that 67 percent of registered voters in the state supported a graduated income tax.
Arizona tax increase for high-income households
A measure on the ballot in Arizona asks voters whether the state should raise taxes on high-income households in order to raise revenue for education.
If Proposition 208 passes, a 3.5 percent surcharge would be imposed on income above $250,000 for single filers and $500,000 for married couples filing jointly. Households with income above these thresholds would effectively see a top state marginal rate of 8 percent, compared to the current 4.5 percent rate.
Money raised by the surcharge would go toward education-related expenses, including teacher salaries, teacher retention programs and a new career training and workforce fund. The Arizona Joint Legislative Budget Committee estimated the surcharge would raise $827 million in its first full year of implementation.
Supporters of the initiative argue it would provide valuable investments in education. Sanders has endorsed the measure, which is also backed by labor unions and Democratic politicians in the state.
Critics of Proposition 208, including Gov. Doug Ducey (R) and business groups, argue that it could hurt small business owners, who pay taxes through the individual code.
A Monmouth University poll conducted in mid-October found a majority of voters support the measure.
Colorado income and property taxes
Colorado has two tax-related ballot measures of note.
The first would lower the state income tax rate for both individuals and businesses from 4.63 percent to 4.55 percent.
The second pertains to property taxes in the state. It would repeal the state’s Gallagher Amendment, which requires that residential property comprise no more than 45 percent of the state’s property tax base.
The Gallagher amendment has resulted in Colorado’s property tax assessment rate — the percentage of a property’s value that’s taxable — to drop for homes over the years, widening the gap between the assessment rates for homes and commercial properties. If repeal of the amendment passes, the assessment rates would stay at their current levels.
The measure repealing the amendment is backed by Gov. Jared Polis (D) and state lawmakers from both parties. Supporters of the measure argue the Gallagher Amendment is burdensome for small businesses and that repealing it would help to prevent reductions in local government services.
Opponents, who include conservative groups and the former Democratic lawmakers who wrote the Gallagher Amendment in the 1980s, argue that a repeal would result in homeowners paying more in taxes than they otherwise would if the amendment remained in place.
Taxing recreational marijuana
Four states have recreational marijuana legalization measures on their ballots: Arizona, Montana, New Jersey and South Dakota.
Arizona’s measure would impose a 16 percent excise tax on sales, in addition to subjecting sales to the state’s sales taxes. Montana’s measure would impose a 20 percent tax on marijuana sales, while South Dakota’s measure would impose a 15 percent tax. New Jersey’s measure would subject sales of cannabis products to the state’s 6.625 percent sales tax.
South Dakota and Mississippi also have measures on their ballots focused on medical marijuana.