Voters Refuse to Tie Their Hands on State Revenues

November 8, 2012 at 2:01 pm

Voters on Tuesday considered a host of ballot measures on tax and budget issues, but the most important from a long-term perspective may have been those in Florida, Michigan and New Hampshire.  All three states rejected major constitutional amendments that would have handcuffed their ability to fund education, health care, and other services that are key to strong state economies.

  • Florida voters rejected, by a decisive 58-42 margin, a formula-based revenue limit based on Colorado’s “TABOR,” which has led to deep cuts in education and health care over time.  By nearly as wide a margin, voters also rejected a cap on property taxes for corporations and other nonresidential property owners.
  • New Hampshire voters rejected an amendment barring the state from enacting a broad-based income tax.  New Hampshire has neither a broad-based income tax nor a general sales tax, relying heavily on property and excise taxes.  Its narrow tax base causes low-income families to pay much more in taxes than higher-income families, relative to their incomes, and makes it harder for the state to finance good schools and other infrastructure and services.  The proposal would have created a major barrier to updating the tax code for changes in the economy and making the tax code fairer, and more adequate for funding services, as the New Hampshire Fiscal Policy Institute has explained.
  • Michigan voters rejected, by a more than 2-1 margin, an amendment requiring a two-thirds vote in both houses of the legislature to pass any tax increase.  This would have empowered a small minority of lawmakers to protect special-interest tax breaks and block new funds for schools, roads, health care, or other services, as the Michigan League for Public Policy has explained.

Voters in other states approved several measures that will have a more immediate impact on states’ ability to finance public services, as states still face major budget challenges in the wake of the Great Recession.  The biggest, a California measure to raise income and sales taxes, will raise $6 billion annually over the next several years to help fund schools, health care, and other services.  California chronically has collected less revenue than it needs to bring its budget into long-term balance, the California Budget Project points out.

California voters also closed a corporate tax loophole that costs over $1 billion annually, and Oregon voted to eliminate a special tax rebate for profitable corporations.

Other efforts to raise new revenue fell short, such as proposed sales tax increases in Arizona and South Dakota.  But on the whole, voters showed this week some important appreciation for the public services that their states provide.

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More About Nicholas Johnson

Nicholas Johnson

Johnson serves as Vice President for State Fiscal Policy. You can follow him on twitter @NickCBPP.

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