As lawmakers try to solve budgetary shortfalls by raising taxes in most states, taxpayers are not pleased, and they said so earlier this month at the polls. Voter instincts mostly were to say no to new taxes. In some states, they also told lawmakers that future tax hikes and spending increases will be even harder to get past voters.
Forty-nine states are required to finish the year with a balanced budget. Only Vermont does not hold legislators to a balanced budget requirement. For the last two years, most states have solved their budget woes by raising taxes and slashing spending. Tapped-out taxpayers are feeling the strain and turned back many of the attempts by lawmakers to raise taxes for a third year in a row.
Following is a rundown of some of the key measures affecting taxes and how they fared:
In Washington State, the powers that be wanted to raise taxes on individuals making more than $200,000, and married couples making more than $400,000. Voters said no. But that was not their final word. They also told lawmakers that if they try to raise taxes again they will not only have to secure a majority, but a super majority or a statewide ballot.
Californians, on the other hand, voted to make the budget subject to a simple majority rather than the current two-thirds majority. California has become famous for annual budget deadlock that drags on for weeks. State law now says that if legislators cannot pass a budget by June 15, they must forfeit pay. Reverting to a simple majority should eliminate some of the deadlock, but makes spending sprees and tax hikes easier.
That doesn’t mean Californians were easy prey on other tax issues. They rejected a measure that would legalize marijuana, even though supporters used the argument that legalization would allow the state to tax sales of cannabis. In addition, California voters refused to pass two revenue raisers: higher fees for using state parks and an attempt to eliminate corporate tax breaks.
Indiana showed lawmakers how serious they were about holding down taxes by putting statutory property tax caps in the state constitution.
Missouri did something similar by adding to its constitution limits to property taxes and city income tax.
Montana voters rejected new taxes on property transfers or sales.
Massachusetts voters repealed a sales tax on alcohol, but they also rejected a drastic cut in overall state sales tax from the current level of 6.25 percent to 3 percent. That cut, if passed, was projected to cost the state $2.5 billion.
"I'm not surprised by that given the political period we're in", said Scott Pattison, executive director of the National Association of State Budget Officers. Pattison told reporters that voters have been shaken by a rocky economy and their trust of government is low.
"We're still in a very scarce resource environment for states,” Pattison said. “So they're going to have to make tough choices. They've already done a lot of cutting. Will they continue to cut?"
Virginia Governor Bob McDonnell told Reuters that the outcome of the elections was an indication that "the American people want limited government, less spending, a focus on job creation, and fiscal responsibility."
Some analysts pointed out the voters across the country have not been united in the way to fix fiscal problems.
Here is what happened in other states:
- North Dakota voted to create a reserve from taxes on extraction.
- Hawaii passed a measure allowing rebates when the state budget is at a surplus.
- Several states, including South Carolina, Oklahoma, and Virginia voted to expand rainy-day funds, which should strengthen the municipal bond markets in each state and provide a way to solve budget woes when necessary.
"My sense is that voters want state budget problems fixed, but they don't want to be involved specifically in how it's done. They want to set ground rules", she said, adding that voters want to "tell governors what's off limits", Tracy Gordon, a visiting fellow at The Brookings Institution, told Reuters. Brookings is a Washington, D.C.-based nonprofit public policy organization.