Voters Reject US State Tax Proposals

by Mike Godfrey, Tax-News.com, Washington

10 November 2008

US voters for the most part acted to reject state tax proposals presented on ballot forms during last Tuesday's presidential election.

Voters in 23 states were asked to consider a variety of tax issues, ranging from tax hikes, tax cuts and new tax-funded schemes. Notable among them was a proposal to repeal the state income tax in Massachusetts, which, somewhat surprisingly, was rejected by about 60% of those who voted. Had they supported this measure, Massachusetts would have become the tenth US state with no general state tax on incomes, joining Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

In North Dakota, proposals to reduce state income tax by half for most individuals was defeated by a similar margin, whilst a proposal to set up an oil tax trust fund was also thrown out.

Meanwhile, voters in Oregon rejected a proposal which would have allowed them to deduct all of their federal income taxes on their state income-tax returns, perhaps heeding warnings by state officials that the move would cut Oregon's budget by more than USD1bn.

Residents of Los Angeles also appeared to do the right thing by their local government, voting to add an extra 0.5% onto the city's sales tax to fund the transportation budget, although a proposal to increase property tax to fund crime reduction programmes was voted down.

In Colorado, a number of local tax hike proposals were presented to voters, ranging from sales tax to school levies, although most of them seem to have been rejected.

By contrast, and seemingly in recognition of the perilous condition of state finances up and down the country, voters decided to approve the majority of state-level bond proposals. These included a bond of almost USD1bn in California to fund veterans' aid, and a USD400m bond in Pennsylvania for improvements to the sewerage infrastructure.

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