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<i>The Week in Public Finance</i>: How Tax Policies Fared at the Ballot Box

Efforts to raise state taxes largely failed. That wasn't the case at the local level.

Oregon voters rejected a measure that would have banned any new tax on groceries.
With a few exceptions, voters across the country on Election Day approved statewide proposals to reduce or limit taxes while also widely rejecting any efforts to raise them. But that wasn't the story at the local level, where several tax increases passed.

Three out of four states voted to restrict tax policy. In Florida, voters enacted a two-thirds legislative supermajority requirement to pass a tax increase. Arizona voters favored a new ban on taxing services. And North Carolinans opted to lower that state’s income tax rate cap.

Measures that limit lawmakers' taxing authority have a mixed track record. “These measures happen in waves,” says Wake Forest University political professor John Dinan. “You might say there’s a bit of a resurgence in their success judging by Tuesday’s results.”

Only the voters in the blue state of Oregon rejected a tax limiting measure. The proposal would have expanded the state’s legislative supermajority requirement. That divergence between red and blue states on this issue is likely a product of the country’s increasing political polarization, says Michael Leachman of the Center on Budget and Policy Priority. But, he warns, places that have “these restrictions in their constitution give [lawmakers] less flexibility to deal with situations that might arise in the future.”

Oregon was also the exception in what otherwise was a wide-ranging repudiation of proposed taxes, with voters rejecting a measure that would have banned any new tax on groceries. A similar ban in Washington state, on the other hand, passed.

Meanwhile, proposed tobacco tax hikes in Montana and South Dakota failed, and Maine voters nixed a proposed payroll tax to fund a universal home health-care program.

Revenue-raising proposals saw more success at the local level.

Denver voters approved a slew of tax increases, including sales tax hikes to help fund parks and mental health services.

In San Francisco, voters approved Proposition C, a controversial measure that will increase a gross receipts tax on the city’s largest companies to help fund homelessness initiatives.

Down the peninsula, Mountain View, home to Google, approved a so-called head tax on companies to raise money for transportation and affordable housing. Earlier this year, the Seattle City Council passed and then rescinded a head tax after threats from Amazon that the company would move jobs elsewhere.

Jared Walczak of the conservative-leaning Tax Foundation says such taxes can backfire. “Tech jobs in particular are highly mobile,” he says, “so that makes it relatively easy to push those jobs out of the area.”

The split on tax hikes are also a product of the fact that it’s harder to get such measures passed statewide. That's because getting conservative-minded voters, who typically live outside of metro areas and oppose tax increases, and more liberal-minded city dwellers to agree is usually a tall order.

Education funding proposals, for example, didn’t see statewide success at the ballot box -- even in a year that saw wide-scale teacher strikes and record support for raising their pay.

Colorado voters easily rejected a proposal to raise income taxes for education funding. And Oklahoma voters narrowly nixed a ballot measure that would have given schools more flexibility to spend local property tax revenue how they want.

The results on two property tax proposals on the ballot were split.

In Louisiana, a proposal designed to help phase in higher property tax payments for homeowners facing huge increases in appraisal values cruised to victory. But in California, despite being home to some of the nation’s highest home prices, voters opted not to expand a controversial property tax break to seniors and the disabled. 

"That’s a win for a saner tax code,” says Walczak of California's measure. The current system under Prop. 13 already creates huge inequities in the way properties are taxed, he adds.

Cutting Prop. 13’s restrictions on property taxes has been an ongoing discussion in Sacramento for years. But Wake Forest’s Dinan said the clear rejection of expanding the proposition could signal that voters are ready to listen. “It could well be that the measure failed because it went against grain of where the discussion in California is moving,” he says.

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Liz Farmer, a former Governing staff writer covering fiscal policy, helps lead the Pew Charitable Trusts’ state fiscal health project’s Fiscal 50 online resource.
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