Voters in several states face variety
of ballot measures on state taxes
By Pat Curry • Bankrate.com

When voters cast their ballots on Nov. 7, they won't just be making decisions on who will represent them in the White House, Congress and their state legislatures. In several states, they also will be saying "yes" or "no" to tax questions covering everything from abolishing inheritance taxes to property tax exemptions of cemetery plots.

Taxes are a hot topic this year, as they have been since the initiative and referendum process was first used in Oregon in 1904. In 17 states, a total of 34 tax-related measures have qualified for the ballot, according to the Initiative and Referendum Institute, a non-profit, non-partisan education and research organization dedicated to the initiative and referendum process. (For a complete list of statewide initiatives and referendums, visit the organization's Web site.) Many of those are sponsored by state legislatures because amendments to the state constitution need voter approval, but a significant number have been proposed by citizens.

According to an article in Investor's Daily News, tax revolt is alive and well, with anti-tax measures passing at a rate of 67 percent since 1996. That's up from 43 percent during the tax revolt of the late 1970s that started with California's passage of Proposition 13 to cut property taxes and make it harder to raise local taxes.

It began in California
"Starting in 1978 with Proposition 13 in California, that re-energized the initiative movement," says M. Dane Waters, president of the Initiative & Referendum Institute. "It showed people how they can bypass an entrenched legislature to give them tax relief. It prompted other initiatives. Since then, 10 to 20 percent of initiatives that are certified for the ballot are tax-related."

A proposed amendment in Arkansas would abolish the state and local sales and use tax on used goods and prohibit the increase of taxes without voter approval at a general election. As is frequently the case with ballot initiatives, this proposal was thrown out by the Arkansas Supreme Court on Oct. 24. Proponents plan to take their fight to the U.S. Supreme Court, hoping to have it reinstated.

It's a big tax year for Oregon residents, who will consider a similar measure to require voter approval for most new and increased taxes and fees, retroactive to 1999.

"If that passes, then all the local tax fees approved by people would have to be revoted on," Waters says. "That's one to watch. It would really shake things up."

Plus, they'll vote on a referendum that would return excess general fund revenues to the taxpayers, and consider two proposals to change the limitations on how much federal income tax residents can deduct on their state tax returns.

Next door, Washington residents will vote on such items as property tax limits and exempting vehicles from property taxes.

Alaskans will vote on annual limits in property assessments, and a ban that would keep "certain municipalities" from setting property tax rates above 10 mills, and repeal a law requiring the same millage rate on all properties.

The "cap on the property tax is pretty intense," Waters says. "Several cities and towns are concerned it's poorly written. There's a big movement in Alaska to consolidate cities and towns to consolidate services, and there's a concern that the way the initiative is worded, it'll keep communities from consolidating."

Fixing Proposition 13
In other major tax-related ballot items, Californians will be asked to close a loophole in Proposition 13, and redefine many fees as taxes that require a two-thirds vote of the legislature.

Massachusetts residents will vote on a reduction of the state income tax from 6 percent to 5 percent, and in Montana and South Dakota, voters will determine the fate of the state's inheritance taxes.

Traditionally, the bulk of citizen-sponsored tax initiatives have dealt with local property taxes, says Todd Donovan, a professor of political science at Western Washington University who has written four books on the initiative and referendum process.

"In Oregon, Washington, and California, they tended to be tremendously successful," Donovan says. "Local governments have been dramatically changed as a result. The next generation -- in the 1990s and now -- are activities trying to go after not just the taxing powers but the spending powers with expenditure limitation formulas."

They know what they're doing
Voting against tax increases is an easy choice for most voters, Donovan says, because it affects their wallet. The harder choice comes in considering the long-term impact. Even then, Donovan says, voters are well equipped to make informed decisions.

"People say had the voters known the long-term implications (of Proposition 13), they never would have passed it," he says. "That couldn't be further from the truth. It's 22 years old, and they continually strengthen the provisions and refuse to soften the provisions. So they don't regret what they did. The people got what they wanted. It makes politics much more interesting."

Bill Raabe, a professor of accounting at Samford University in Birmingham, Ala., and the author of several taxation textbooks, agrees that the current spate of tax-related initiatives is tied to the economic prosperity that's led to the surpluses.

"Because the economy has been good for awhile, people look at their tax returns and say 'I'm paying how much in tax?'" he says.

Raabe, who is strongly opposed to tax caps and freezes, notes that "in a suburb or a county with not that many voting booths, on a rainy day, it only takes a handful of people to put an idea through, and most of them are terrible ideas. I don't think you can handcuff government this way. When the economy slows down, the role of government is to pick up the slack in my opinion and that takes revenue. Because of these bills, if the revenue isn't there, it's going to be pretty ugly."

Colorado residents will consider an initiative that would require voter approval for any new legislative tax. It's much like one already passed by Washington state residents.

"It's interesting because the voters now will be expressly asked to approve tax increases on a program-by-program basis," Donovan says. "Ours was similar. It wasn't just this sort of anti-tax motivation. People really liked the provision. They think they're just as competent at making policy as the legislature and they want a role in that decision-making."

Pat Curry is a free-lance writer based in Georgia

-- Posted Oct. 26, 2000