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Top State Tax Ballot Initiatives to Watch in 2016

11 min readBy: Joseph Bishop-Henchman, Scott Drenkard, Nicole Kaeding, Jared Walczak, Morgan Scarboro

(Results of all of these ballot initiatives can be found here).

Ballot initiatives and referenda are often an afterthought on Election Day, but in many states, voters going to the polls on November 8th, 2016 will have the opportunity to weigh in on significant—in some cases, momentous—policy questions.

On the issue of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. ation alone, voters must decide whether to impose a first-in-the-nation carbon taxA carbon tax is levied on the carbon content of fossil fuels. The term can also refer to taxing other types of greenhouse gas emissions, such as methane. A carbon tax puts a price on those emissions to encourage consumers, businesses, and governments to produce less of them. (Washington), adopt a new income and payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. to fund a state public option health care system (Colorado), levy a high-rate gross receipts taxA gross receipts tax, also known as a turnover tax, is applied to a company’s gross sales, without deductions for a firm’s business expenses, like costs of goods sold and compensation. Unlike a sales tax, a gross receipts tax is assessed on businesses and apply to business-to-business transactions in addition to final consumer purchases, leading to tax pyramiding. (Oregon), extend temporary income tax increases (California), impose a new high-income surcharge (Maine), legalize and tax marijuana (five states), and hike cigarette taxes (four states), just to name a few of the tax changes on ballots across the country.

Although ballot issues often fly under the radar, they merit taxpayer attention. In the coming days and weeks, this page will continue to be updated with links to Tax Foundation research and analysis on some of the most significant ballot questions of 2016.

We have tried our best to select the largest and most impactful ballot initiatives on tax issues, but admit that this list is not comprehensive. Other helpful resources include Ballotpedia’s Ballot Measures page, and the National Taxpayers Union’s annual Ballot Guide.

Arizona Proposition 205: Marijuana Legalization

Proposition 205 would legalize recreational marijuana in Arizona, taxing the product at the general sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. rate and adding an excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. at 15 percent of the retail sale price. Read our analysis here.

California Proposition 55: Extension of Temporary Income Tax Increase

Proposition 55 would extend California’s temporary income tax increases on high income earners passed in 2012 under Proposition 30 (our coverage back in 2012). If passed, California would retain a top individual income taxAn 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. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. rate of 13.3 percent, the highest rate in the country. Read our analysis here.

California Proposition 56: Tobacco Tax Increase

Proposition 56 would increase taxes on cigarettes from $0.87 to $2.87 per pack. If enacted, California would impose the 9th highest cigarette tax in the country, with taxes comprising over 40 percent of the purchase price of the product. Read our analysis on Proposition 56 here.

California Proposition 64: Marijuana Legalization

Proposition 64 would legalize recreational marijuana in California, taxing the product once during cultivation at $9.25 per ounce of flowers and $2.75 per ounce of leaves, and then again at 15 percent at the point of retail sale, in addition to the general sales tax rate. Read our analysis here.

California Local Measure HH, Proposition V, and Measure 01: Soda TaxA soda tax is an excise tax on sugary drinks. Most soda taxes apply a flat rate per ounce of a sugar-sweetened beverage. es

Three California cities—San Francisco, Oakland, and Albany—are considering an excise tax on sugar-sweetened beverages at a rate of 1 cent per ounce. Read our analysis on soda tax ballot initiatives in U.S. News & World Report here.

California – Los Angeles Measure M; Sacramento Measure B; San Diego Measures A, C, D, and N; and San Francisco Propositions J and K

Click here for more details on California’s local ballot initiatives, which are primarily half-cent sales taxes for transportation but also include measures in San Diego to tax marijuana and raise hotel taxes to construct a new football stadium.

Colorado Amendment 69: ColoradoCare Payroll and Income Tax

Amendment 69 would impose a 10 percent payroll and income tax (termed the “premium tax”) atop the state’s existing 4.63 percent single-rate individual income tax to fund a new public option health care system, to be called ColoradoCare. The administration of ColoradoCare would be entrusted to a 14-member board of trustees which would operate as an independent political subdivision of the state, not accountable to the legislative or executive branch. Adoption of Amendment 69 would give Colorado the highest individual income tax of any state, at 14.63 percent on the first $350,000 in income ($450,000 for joint filers). Read our analysis here.

Colorado Amendment 72: Cigarette Tax Increase

Amendment 72 would increase Colorado’s cigarette tax from $0.84 to $2.59 per pack, moving the state to the 10th highest cigarette tax in the country. If enacted, excise taxes would make up over 40 percent of the purchase price of the product. Read our analysis here.

Colorado – Boulder Measure 2H: Soda Tax

Measure 2H in Boulder, Colorado would enact a 2 cents per ounce soda tax. Under the proposed tax, a 12-pack of soda would be taxed at $2.88, an effective tax rate of nearly 50 percent. Read our analysis on soda tax ballot initiatives in U.S. News & World Report here.

Georgia – Fulton County TSPLOST, Atlanta TSPLOST, and MARTA Referendum

Voters will decide two transportation special purpose local option sales and use tax (TSPLOSTs) referenda and one MARTA referendum: 1) a 0.75 percent sales tax increase in Fulton County outside the city of Atlanta for five years to fund transportation improvements; 2) a 0.4 percent sales tax increase in the city of Atlanta for five years to fund transportation improvements like the Atlanta BeltLine and street and sidewalk improvements; and 3) a 0.5 percent sales tax increase in the city of Atlanta to expand the MARTA rail system. The MARTA tax would be in addition to the existing 1 percent MARTA sales tax, which is currently set to drop to 0.5 percent in 2047 and zero in 2058. If both the Atlanta TSPLOST and MARTA taxes are approved, Atlanta’s sales tax would rise to 8.9 percent, increasing from tied for 51st highest of major cities in the country to 14th highest.

Illinois – Transportation Lockbox Amendment

This measure would require all transportation-related tax and fee revenue be spent only on transportation and transportation-related debt service, and not diverted to other budget items. It does not raise any additional revenue, so any revenue currently used for general fund purposes would require offsetting revenue increases or spending reductions.

Louisiana Amendment 3: Repeal of Federal Deductibility of Corporate Income TaxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax.

Amendment 3 would repeal Louisiana’s obscure corporate tax deductionA tax deduction is a provision that reduces taxable income. A standard deduction is a single deduction at a fixed amount. Itemized deductions are popular among higher-income taxpayers who often have significant deductible expenses, such as state and local taxes paid, mortgage interest, and charitable contributions. for federal taxes paid, and concurrent legislation would lower the corporate tax rate from 8 percent to 6.5 percent, bringing the state more in line with other states in the region. Read our analysis on Amendment 3 here.

Maine Question 1: Marijuana Legalization

Question 1 would legalize recreational marijuana in Maine and tax the sale of the product at 10 percent. Read our analysis here.

Maine Question 2: Individual Income SurtaxA surtax is an additional tax levied on top of an already existing business or individual tax and can have a flat or progressive rate structure. Surtaxes are typically enacted to fund a specific program or initiative, whereas revenue from broader-based taxes, like the individual income tax, typically cover a multitude of programs and services.

Question 2 would increase Maine’s top individual income tax rate from 7.15 percent to 10.15 percent for incomes above $200,000, giving the state the highest top income tax rate in the Northeastern United States, and the second top income tax rate in the country, behind only California. Read our analysis on Question 2 here.

Massachusetts Question 4: Marijuana Legalization

Question 4 would legalize recreational marijuana in Massachusetts, subjecting the product to the state sales tax and an additional excise tax of 3.75 percent, while allowing cities or towns to impose an additional tax of up to 2 percent. Read our analysis here.

Michigan – Southeast Michigan: Property TaxA 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.

This proposal would raise property taxes by 1.2 mills for 20 years to fund a rail system between Detroit and Ann Arbor and other regional transportation improvements.

Missouri Proposition A and Amendment 3: Tobacco Tax Increases

Proposition A would increase cigarette taxes in Missouri from $0.17 per pack to $0.40 per pack over five years. Amendment 3 would increase the tax to $0.77 while also imposing a new $0.67 fee on certain manufacturers not included in the Master Settlement Agreement (this fee would be increased according to inflationInflation is when the general price of goods and services increases across the economy, reducing the purchasing power of a currency and the value of certain assets. The same paycheck covers less goods, services, and bills. It is sometimes referred to as a “hidden tax,” as it leaves taxpayers less well-off due to higher costs and “bracket creep,” while increasing the government’s spending power. each year). State authorities are not sure which proposal (or both) would take effect if both measures pass.

Missouri Amendment 4: Constitutional Prohibition of Sales Tax Service Expansion

Dubbed the “Taxpayer Protection Amendment,” Amendment 4, pushed by the Missouri Association of Realtors, would prohibit adding any “service or transaction” to the state or local sales tax baseThe 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. if it was not taxed as of January 1, 2015. This prohibition on sales tax base-broadening could stifle the state’s ability to properly reform its tax code, making chances at rate reductions in future years more difficult. Read our analysis of Missouri Amendment 4 here.

Nevada Question 2: Marijuana Legalization

Question 2 would legalize recreational marijuana in Nevada and tax the wholesale value of the product at 15 percent, in addition to subjecting it to state and local sales taxes. Read our analysis here.

Nevada – Clark County: Ballot Question No. 5

This ballot measure would continue to tie the gasoline excise tax to the Consumer Price Index rate of inflation to help pay for road maintenance. The county began indexing the tax in 2013; Ballot Question No. 5 would extend this through 2026. A number of states, including Florida, Georgia, Maryland, and Utah, currently adjust their gasoline taxes based at least in part on inflation to address the declining purchasing power of the gas taxA gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. .

New Jersey Public Question 2: Transportation Lockbox

Question 2 would require all gas tax revenue be dedicated to transportation purposes. The state recently raised its gas tax; this measure does not affect that but would require that all of the money be spent on transportation and transportation-related debt service, and not diverted to other budget items.

North Carolina – Wake County: Local Sales Tax Increase to Fund Transit

This measure would raise the sales tax by a half-cent for 10 years to fund specified public transportation improvements, including commuter rail between Raleigh and Durham, and a regional bus rapid transit system.

North Dakota Measure 4: Tobacco Tax Increase

Measure 4 would increase North Dakota’s cigarette tax from $0.44 to $2.20 per pack, increase the tax on other tobacco products (OTP) from 28 percent to 56 percent of wholesale price, and expand the OTP category to include vapor products. Read our analysis here, and our comprehensive review on taxes on vapor products here.

Ohio – Cleveland Issue 32: Income Tax

Issue 32 would increase Cleveland’s local income tax from 2 percent to 2.5 percent. Ohio has hundreds of local income taxes, which are administered in a complex and non-uniform manner.

Oklahoma Question 779: Sales Tax Rate Increase

Question 779 would increase the Oklahoma state sales tax rate from 4.5 to 5.5 percent. Oklahoma also features high local option sales taxes, with an average local rate of 4.35 percent, so the higher state rate—designed to raise $550 million in additional revenue earmarked for teacher salary increases and other education expenditures—would yield an average combined state and local sales tax rate of 9.85 percent, the second highest in the country after Louisiana (9.98 percent). Read our analysis on Question 779 here.

Oregon Measure 26-180 (City of Portland, Multnomah County, Clackamas County, Washington County): Marijuana Tax

Measure 26-180 would impose a 3 percent local excise tax on marijuana sales.

Oregon Measure 97: Gross Receipts Tax

Oregon voters face one of the most potentially economically destructive questions on the ballot this year, with a proposal to institute a 2.5 percent gross receipts tax on corporations with substantial sales volume in Oregon. While 2.5 percent seems small, because it is levied on total receipts instead of total profits, it is many of orders of magnitude greater voters might think. For context, Ohio’s Commercial Activity Tax is levied at a rate of 0.26 percent, raising around 10 percent of state revenue. Oregon’s tax Is projected to bring in $6 billion dollars over the biennium budget, swelling government revenues by 25 percent. Read our many, many pieces on Measure 97 here.

Texas – Arlington: Ballpark Sales Tax

This proposal would raise the local sales tax by 0.5 percent, the hotel tax by 2 percent, and rental car tax by 5 percent, and impose a baseball tickets tax, to fund a $1 billion baseball stadium for the Texas Rangers. Arlington’s current 8 percent sales tax is tied for 51st highest of major cities in the country; raising it to 8.5 percent would have it tie for 21st highest.

Virginia – Fairfax County: Meals Tax

Residents of Virginia’s populous Fairfax County will decide whether to adopt a 4 percent tax on restaurant meals and other prepared foods. Several other Northern Virginia counties already impose meals taxes. Read our analysis here.

Washington Initiative 732: Carbon Tax

Initiative 732 would impose a first-in-the-nation carbon tax at an initial rate of $15 per metric ton of carbon emissions, rising to $25 per ton the subsequent year and by inflation plus 3.5 percent each year thereafter until it reaches an inflation-adjusted $100 (in 2016 dollars), after which it would be indexed to inflation but cease to increase in real terms. The sales tax rate would be phased down from 6.5 to 5.5 percent over two years, and the gross receipts tax rate on manufacturing would decline from 0.484 percent to 0.01 percent. Read our full analysis here.

Washington – King, Pierce, and Snohomish Counties Regional Measure ST3: Transportation Taxes

Sound Transit 3 would raise the sales tax by 0.5 percent, increase motor vehicle excise tax (MVET) license tab tax by 0.8 percent, and increase property taxes by 25 cents for each $1,000 of assessed valuation. Sound Transit is also authorized to raise car rental taxes by an additional 1.372 percent if ST3 passes. The taxes would stand until completion of all the projects in the ST3 plan; the taxes are in addition to the existing Sound Transit 0.9 percent sales tax and 0.3 percent MVET license tab tax. The ST3 plan would add 62 miles of light rail service as well as expanded bus rapid transit and commuter rail service. Seattle’s current sales tax of 9.6 percent is the sixth highest of major cities in the United States; the higher rate of 10.1 percent would still be sixth highest.

Washington – Olympia Initiative 1: Income Tax

Olympia Initiative 1 would impose a 1.5 percent local income tax to establish a college grant program within the city. Local income taxes are prohibited by state law in Washington, meaning that the tax would be subject to legal challenge. Read our analysis of Initiative 1 here.