October 5, 2020

State and Local Tax Ballot Measures to Watch on Election Day 2020

Featured Ballot Measures

Arizona Proposition 207

Arizona Proposition 207 would legalize recreational marijuana and tax retail sales at 16 percent of retail price. Arizona forecasts roughly $166 million in excise tax revenue when the market has matured, and this revenue would be allocated to community colleges, police departments, fire departments, transportation funding, and a new Justice Reinvestment fund. Click here for the Tax Foundation’s full analysis.

Arizona Proposition 208

Arizona Proposition 208 would create a new top marginal individual income tax rate of 8 percent on taxable income above $250,000 (single filers) and $500,000 (joint filers). Revenue from the new top rate would be dedicated to education rather than to the General Fund. Click here for the Tax Foundation’s full analysis.

California Proposition 15

California Proposition 15 would undo the protections of California’s Proposition 13 and introduce “split roll” property taxation—commercial properties would be assessed on their market value, while residential properties would continue being assessed on purchase price. Ultimately, this would yield significantly higher taxation of businesses without resolving the inequities created by Proposition 13. This measure could also affect the tax exemption for solar energy systems. Click here for the Tax Foundation’s full analysis.

Colorado Amendment B

Colorado Amendment B would repeal the Gallagher Amendment, a longstanding but nonneutral provision within the Colorado constitution that limits residential property to 45 percent of the statewide property tax base. Amendment B would also remove property tax assessment rates from the constitution, instead allowing those rates to be set by the legislature (and approved by voters, where applicable).

While the amendment itself does not establish any new rates or limitations, legislation was proactively enacted earlier this year that would freeze assessment rates at their current levels if Amendment B is ratified. While a statutory rate freeze would prevent significant residential property tax increases from occurring in the short term, over time, residential property taxes would be expected to increase as home values continue to rise. This would, however, ultimately yield a more equitable and competitive tax system, as the continuation of the current structure threatens to make doing business in Colorado increasingly expensive. Click here for the Tax Foundation’s full analysis.

Colorado Proposition 116

Colorado Proposition 116 would reduce the income tax rate from 4.63 percent to 4.55 percent on both the individual and corporate sides. The tax cut would be retroactive to January 1, 2020, meaning taxpayers would benefit from the relief starting this year. Click here for the Tax Foundation’s full analysis.

Colorado Proposition EE

Colorado Proposition EE would increase the cigarette tax per pack to $1.94 in 2021, $2.24 in 2024, and $2.64 in 2027. Taxes on other tobacco products would increase to 50 percent of wholesale value in 2021, to 56 percent of wholesale value in 2024, and to 62 percent of wholesale value in 2027.  It would also create a tax on e-vapor products that is equal to the tobacco tax rate. FDA-certified modified-risk tobacco products would be taxed at half of the statutory tobacco tax rate, effective January 2021. Click here for the Tax Foundation’s full analysis.

Illinois’ Allow for Graduated Income Tax Amendment

Illinois’ Allow for Graduated Income Tax Amendment would remove the constitutional requirement for a flat income tax, allowing the legislature to create a graduated-rate structure. While the constitutional amendment itself does not set new income tax rates, legislation was proactively adopted in 2019 with rates that would take effect on January 1, 2021, if the amendment is ratified by voters.

Under the enacted rate schedule, a new top rate of 7.99 percent would take effect, which includes a recapture provision that would subject all income to that rate for taxpayers with more than $750,000 (single filers) or $1 million (joint filers) in taxable income. Meanwhile, since most businesses in Illinois are required to pay the personal property replacement tax (PPRT) on the same income base, partnerships, S corporations, and trusts would end up paying a top rate of 9.49 percent and C corporations would pay a top rate of 10.49 percent when the PPRT is included. If Amendment B is adopted, Illinois would have the second-highest corporate income tax rate in the country and the sixth-highest rate on pass-through businesses. Click here for the Tax Foundation’s full analysis.

Montana I-190

Montana I-190 would legalize the sale of recreational marijuana, taxed at 20 percent of the retail price. Montana estimates $38.5 million in excise tax revenue when the market has matured, and revenue would be divided among the general fund, conservation programs, veteran programs, drug addiction treatment programs, local authorities enforcing the initiative, and health-care workers. Click here for the Tax Foundation’s full analysis.

New Jersey Question 1

New Jersey Question 1 would amend the state constitution to legalize the recreational use of marijuana and impose the general sales tax on those transactions. It also allows for a 2 percent local tax. Other taxes levied at the retail level would be prohibited under the amendment, but the legislature could apply taxes at the cultivation or wholesale level. Click here for the Tax Foundation’s full analysis.

South Dakota Amendment A

South Dakota Amendment A would legalize the recreational use of marijuana and impose an excise tax of 15 percent of sales price. South Dakota estimates collections totaling $29 million from the excise tax, fees, and the general sales tax. Revenue would be divided between the general fund and state public schools. Click here for the Tax Foundation’s full analysis.

All Ballot Measures by State

Alaska Ballot Measure 1 would increase the Oil Production Tax on high-producing fields in the North Slope by applying an alternative gross minimum tax or an additional production tax. The choice of tax will be determined based on which is highest. The new tax would only apply to fields that are located above 68 degrees north latitude, has had a lifetime yield of 400 million barrels of oil, and yield of 40,000 barrels a day in the preceding year. Alaska’s current structure yields unusually high effective tax rates when oil profits are high, but at the cost of lower-than-average taxation when prices are low. This proposal would, for select fields, provide for higher taxes in lean years without reducing the aggressiveness of taxation in better years. Tax Foundation analysis is forthcoming.

Arizona Proposition 207 would legalize recreational marijuana and tax retail sales at 16 percent of retail price. Arizona forecasts roughly $166 million in excise tax revenue when the market has matured, and this revenue would be allocated to community colleges, police departments, fire departments, transportation funding, and a new Justice Reinvestment fund. Click here for the Tax Foundation’s full analysis.

Arizona Proposition 208 would create a new top marginal individual income tax rate of 8 percent on taxable income above $250,000 (single filers) and $500,000 (joint filers). Revenue from the new top rate would be dedicated to education rather than to the General Fund. Click here for the Tax Foundation’s full analysis.

Arkansas Issue 1 would make permanent the temporary 0.5 percent sales tax for transportation funding. The tax has been in place since Issue 1 was approved in 2012 but is set to expire in 2023.  The tax is forecast to raise $293.7 million in the first full year of collections.

California Proposition 15 would undo the protections of California’s Proposition 13 and introduce “split roll” property taxation—commercial properties would be assessed on their market value, while residential properties would continue being assessed on purchase price. Ultimately, this would yield significantly higher taxation of businesses without resolving the inequities created by Proposition 13. This measure could also affect the tax exemption for solar energy systems. Click here for the Tax Foundation’s full analysis.

San Francisco Proposition RR would create an additional sales tax of 0.125 percent for 30 years to raise revenue for the Caltrain rail service, increasing San Francisco sales taxes from 8.5 percent to 8.625 percent.

San Francisco Proposition F would make several changes to the city’s Business Tax and Regulations Code. The measure would reduce the annual registration fee for businesses with less than $1 million in gross receipts, increase the fee for businesses with over $1 million, and repeal the payroll expense tax, among other changes.

San Francisco Proposition I would raise the real estate transfer tax to 5.5 percent on transactions between $10 million and $25 million, and to 6 percent on transactions over $25 million.

San Francisco Proposition L would create an additional tax of 0.1 to 0.6 percent of gross receipts or 0.2 to 2.4 percent of payroll for businesses in which the highest management salary is over 100 times the median salary. The Tax Foundation previously analyzed a similar “excess compensation” tax here.

Colorado Amendment B would repeal the Gallagher Amendment, a longstanding but nonneutral provision within the Colorado constitution that limits residential property to 45 percent of the statewide property tax base. Amendment B would also remove property tax assessment rates from the constitution, instead allowing those rates to be set by the legislature (and approved by voters, where applicable).

While the amendment itself does not establish any new rates or limitations, legislation was proactively enacted earlier this year that would freeze assessment rates at their current levels if Amendment B is ratified. While a statutory rate freeze would prevent significant residential property tax increases from occurring in the short term, over time, residential property taxes would be expected to increase as home values continue to rise. This would, however, ultimately yield a more equitable and competitive tax system, as the continuation of the current structure threatens to make doing business in Colorado increasingly expensive. Click here for the Tax Foundation’s full analysis.

Colorado Proposition 116 would reduce the income tax rate from 4.63 percent to 4.55 percent on both the individual and corporate sides. The tax cut would be retroactive to January 1, 2020, meaning taxpayers would benefit from the relief starting this year. Click here for the Tax Foundation’s full analysis.

Colorado Proposition 117 would require new state enterprises—government-owned businesses that gain money by providing goods and services—to receive voter approval if their revenues from fees and related charges would exceed $100 million within their first five years. Under current law, such enterprises are exempt from Taxpayer’s Bill of Rights (TABOR) limitations.

Colorado Proposition EE would increase the cigarette tax per pack to $1.94 in 2021, $2.24 in 2024, and $2.64 in 2027. Taxes on other tobacco products would increase to 50 percent of wholesale value in 2021, to 56 percent of wholesale value in 2024, and to 62 percent of wholesale value in 2027.  It would also create a tax on e-vapor products that is equal to the tobacco tax rate. FDA-certified modified-risk tobacco products would be taxed at half of the statutory tobacco tax rate, effective January 2021. Click here for the Tax Foundation’s full analysis.

Georgia Amendment 1, the Dedicating Tax and Fee Revenue Amendment, would authorize the General Assembly to pass legislation requiring that taxes or fees collected for a stated purpose be used as intended. The amendment would also allow the legislature to establish specific funds for specific purposes, provided that such legislation receives a two-thirds affirmative vote in each chamber and that such dedicated revenues do not exceed 1 percent of total state revenues. The amendment prohibits dedicated funds from being reallocated once they are dedicated. However, a law dedicating specific funds for a specific purpose could be repealed with a simple majority vote.

Illinois’ Allow for Graduated Income Tax Amendment would remove the constitutional requirement for a flat income tax, allowing the legislature to create a graduated-rate structure. While the constitutional amendment itself does not set new income tax rates, legislation was proactively adopted in 2019 with rates that would take effect on January 1, 2021, if the amendment is ratified by voters.

Under the enacted rate schedule, a new top rate of 7.99 percent would take effect, which includes a recapture provision that would subject all income to that rate for taxpayers with more than $750,000 (single filers) or $1 million (joint filers) in taxable income. Meanwhile, since most businesses in Illinois are required to pay the personal property replacement tax (PPRT) on the same income base, partnerships, S corporations, and trusts would end up paying a top rate of 9.49 percent and C corporations would pay a top rate of 10.49 percent when the PPRT is included. If Amendment B is adopted, Illinois would have the second-highest corporate income tax rate in the country and the sixth-highest rate on pass-through businesses. Click here for the Tax Foundation’s full analysis.

Louisiana Amendment 3 would enable the legislature to dedicate up to one-third of the budget stabilization fund to cover costs in the case of a federally-declared disaster.

Louisiana Amendment 5 would give local governments the authority to allow new or expanding manufacturers to submit payments in lieu of property taxes.

Louisiana Amendment 6 would raise the threshold to qualify for the special property assessment level for seniors, military, and disabled persons from $50,000 to $100,000 beginning in 2026.

St. Louis’s Proposition R would levy an additional property tax of $60 per $100,000 of assessed value to fund early childhood services.

Montana I-190 would legalize the sale of recreational marijuana, taxed at 20 percent of the retail price. Montana estimates $38.5 million in excise tax revenue when the market has matured, and revenue would be divided among the general fund, conservation programs, veteran programs, drug addiction treatment programs, local authorities enforcing the initiative, and health-care workers. Click here for the Tax Foundation’s full analysis.

Nebraska Initiative 431 would place a 20 percent tax on gross annual gambling revenue from licensed racetracks. Gross revenue is defined as total money gambled minus winnings, federal taxes, and promotional credits. Revenue would be distributed to the Compulsive Gamblers Assistance Fund, the general fund, the Property Tax Credit Cash Fund, and the counties where gambling is authorized.

In order to take effect, voters would need to approve Initiative 429 and Initiative 430. If approved, Initiative 429 would amend the Nebraska constitution to allow for laws that authorize, regulate, and tax gambling. If enacted, Initiative 430 would authorize and regulate gambling at licensed racetracks.

New Jersey Question 1 would amend the state constitution to legalize the recreational use of marijuana and impose the general sales tax on those transactions. It also allows for a 2 percent local tax. Other taxes levied at the retail level would be prohibited under the amendment, but the legislature could apply taxes at the cultivation or wholesale level. Click here for the Tax Foundation’s full analysis.

Oregon Measure 108 would create a tax on vapor products and other nicotine products at 65 percent of the wholesale price and raise the cigarette tax from $1.33 to $3.33 per 20-pack. The measure would also increase the cap on taxes on cigars from $0.50 per cigar to $1.00 per cigar. Click here for the Tax Foundation’s full analysis.

Portland Measure 26-213 would levy a property tax of $80 per $100,000 for five years starting in 2021 to provide parks and recreation funding.

South Dakota Amendment A would legalize the recreational use of marijuana and impose an excise tax of 15 percent of sales price. South Dakota estimates collections totaling $29 million from the excise tax, fees, and the general sales tax. Revenue would be divided between the general fund and state public schools. Click here for the Tax Foundation’s full analysis.

Utah Amendment G would expand the use of income tax revenue to include assisting children and those with disabilities.

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The tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates.

A property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services.

An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. Individual income taxes are the largest source of tax revenue in the U.S.

Taxable income is the amount of income subject to tax, after deductions and exemptions. For both individuals and corporations, taxable income differs from—and is less than—gross income.