Tax initiatives on state ballots

The Initiative and Referendum Institute says this year voters in 30 states are set to decide 112 ballot propositions. And while social issues are dominating this year, there are some interesting tax and spending ballot measures.

Massachusetts has the most intriguing and frightening ballot question. Bay State voters will get to decide whether they want to eventually repeal their income tax. The proposal actually has two parts. First, Massachusetts' personal income tax rate would be reduced in 2009 to 2.65 percent for all categories. Then it would be eliminated for tax years after 2009.

For folks in the 43 states that collect income tax, that's a dream come true. Or so they think. But step back into the real world for a minute. How is Massachusetts or any state going to cope with the sudden loss of its prime revenue source?

As I blogged about Aug. 7 in "State tax troubles, too," most states are struggling economically as much as their residents. Ballot efforts, such as the one in Massachusetts, could be catastrophic.

If you see a tax referendum on your ballot when you enter the voting booth, before you cast you vote, ask yourself what programs and services you, personally, are willing to give up in order to, as most initiative advocates argue, keep your money out of politicians' hands.

That old saying, be careful what you wish for, is running in a loop in my head every time I read about these types of tax limitation efforts.

Tom Herman, who writes The Wall Street Journal's Tax Report column, looks at the ramifications of the Massachusetts vote, which could extend well beyond New England.

Carla Howell of the Committee for Small Government, a nonprofit citizen group battling to repeal the Massachusetts tax, told Herman, "There are tax-cut activists around the country who are very interested in what we're doing here. If it does well, we may see copycat initiatives in 2010 and 2012 across the country."

Yep, monkey see, monkey do definitely applies when it comes to taxes. Look at what California's Proposition 13 property tax limitation initiative of 30 years ago wrought nationwide.

Florida property tax problems: An east coast state this election year is working to put its own property tax proposal before voters. But Florida has run into some roadblocks.

Amendment 5 was placed on the Sunshine State's ballot in April by the Taxation and Budget Reform Commission. It would eliminate the public education portion of all property tax bills that is required by the legislature to obtain state funding. The move is projected to produce an average 25 percent cut of property tax bills statewide.

To make up the estimated $9-billion-plus difference, the proposal would, in part, include a state sales tax increase of up to 1 percentage point.

But not everybody is happy with the proposed tax swap. A group representing Florida's largest business, education, and senior interest groups has filed suit to stop the vote. This week the state Supreme Court agreed to hear the case.

The proposal was taken off the ballot by order of a lower court ruling. If the Florida Supreme Court says put it back, the measure will need approval of 60 percent of the voters to take effect.

What's happening in your neck of the woods? Will you see a tax or other type of ballot initiative or amendment when you go to vote in your state? You can check out the Initiative and Referendum Institute and Ballotpedia Web sites.

Second round of sales tax holidays

Most states that hold the holidays waived sales tax collections on a variety of purchases during the first weekend of August. Now it's time for tax-holiday round two.

Texas kicks off this latest session of back-to-school sales tax-free shopping Friday, Aug. 15. The Lone Star State's tax, as well as most local levies, will be waived through Sunday.

Massachusetts shoppers have just Saturday and Sunday to save on certain items.

Connecticut buyers, however, have a week. The Nutmeg State's event runs from Sunday, Aug. 17, through Saturday, Aug. 23.

More on the way: If you live in D.C., Georgia, South Carolina, Virginia or West Virginia, you might want to get out your calendar. In a couple of months, these states will hold yet another round of sales tax holidays.

Georgia, Virginia and West Virginia will reward energy-efficient shoppers. West Virginia's event is Sept. 1 to Sept. 7; Georgia's runs Oct. 2 to Oct. 5; and Virginia shoppers get tax savings Oct. 10 to Oct. 13.

Washington, D.C.'s second sales tax holiday of 2008 is scheduled for Nov. 21 through Dec. 1, to offer holiday shoppers even more incentive to hit the local malls.

Guns galore: And then there's South Carolina's sales tax holiday.

The Palmetto State has come up with the most unique and certain to be talked about tax holiday ever. On the Friday and Saturday after Thanksgiving, South Carolina will hold its Second Amendment Sales-Tax Holiday.

Yep, it's what it sounds like. On Nov. 28 and Nov. 29, South Carolina will waive collection of its 6 percent sales tax on the purchase of handguns, rifles and shotguns. The tax holiday will be an annual post-Thanksgiving event.

As a Texan, I've lived all my life dealing with jokes about what a gun happy lot we are, but South Carolina has put an end to those quips, at least for a while. I suspect, however, that there are some Lone Star State lawmakers who are kicking themselves for not coming up with this idea first.

State tax troubles, too , I was getting tired of hearing about how the national economy is in, or going into, the tank, so I decided to check out how things are fiscally in individual states.

Unfortunately, that news isn't so good either. Don't shoot the messenger, I'm just telling you what I found, or rather, what the Nelson A. Rockefeller Institute of Government found.

The Rockefeller Institute is the public policy research arm of the State University of New York in Albany, and its Fiscal Studies Program has been looking into policy and trends affecting all 50 states since May 1990.

What researchers saw for the first quarter of 2008 wasn't pretty. State tax collections then were at their weakest in five years, according to the Institute's report, with sales tax collection, a key revenue source for most states, coming in flat for the first three months of this year. That's the first time in six years that has happened.

While you, as a taxpayer, might think this is good news, it's not. If your state isn't getting enough money, it's either going to cut services or find another way to tax you.

Yeah, I know, all governments are full of waste, and one taxpayer's valuable benefit is another's money down a rat hole. But if things get so bad that a lot of programs are reduced or eliminated, one of them will eventually affect you. And it's never fun when budget cuts hit home.

Now I'm not advocating that governments have carte blanche to tax willy-nilly. But neither should citizens expect them to run, or run well, on shoestring budgets. Some sense needs to be used on both sides. And the color of the sky in my wishful thinking world is a nice mauve.

Tightest budgets: Is your state in dire fiscal trouble thanks to lagging tax collections? It is if you live in Arizona, Montana and Florida. These states saw revenue declines of more than 10 percent, much of it no doubt due to high foreclosure rates that meant property taxes dropped.

A dozen other states also experienced slightly smaller revenue declines from January through March, according to the Rockefeller Institute survey. They are: Georgia, Idaho, Mississippi, Nebraska, Nevada, New Jersey, North Carolina, Ohio, Oklahoma, Rhode Island, South Carolina, and Utah.

But a handful of states -- Alaska, Iowa, North Dakota and West Virginia -- actually recorded tax collection increases of more than 10 percent.

Hopeful Hoosiers: Indiana isn't on either of the Rockefeller Institute's extreme tax collection lists, but the Hoosier State's governor apparently thinks his state is doing OK and he wants to literally share the wealth with residents.

This week, Gov. Mitch Daniels called for a refund plan that would give taxpayers money whenever the state's surplus is large enough. Under the proposal, Indianans who file a state tax return would get a credit whenever the state has a surplus that exceeds a predetermined amount of the next year's budgeted spending.

Of course, there is the flip side. When the state legislature increases the budget to meet various needs, or if an economic downturn cuts into Indiana's fiscal reserves, taxpayers wouldn't get the refund.

The Indianapolis Star reports that an analysis by the governor's office of state finances going back to 1992 showed such credits would have been possible in at least four years, 1995 through 1998. In 1995, the average refund check would have been $144 for each person filing an Indiana return, double that for couples filing jointly.

Not that I'm a cynic or anything, but isn't it interesting that such a proposal appears just a couple of months before election day?

Home-sale law change update: A quick shout out to blog readers who wrote after my earlier post on the change to the home-sale tax exclusion when it comes to second homes that are converted to principal residences. I got your questions and am working on a story that will elaborate on this new law. Thanks for reading, writing and your patience while I flesh out this topic.