Voters Weigh in on State Taxes

By Sandra Block
From Kiplinger’s Personal Finance

While control of Congress received most of the attention during the November midterm elections, voters in more than a dozen states also voted on a smorgasbord of ballot initiatives that could affect your state tax bill.

As was the case with many congressional elections, the results were all over the map, says Richard Auxier, senior policy associate with the Tax Policy Center.

Even if your state didn’t have a tax-related initiative on the ballot, it’s not unusual for states to adopt measures that proved successful elsewhere, especially if that happens to be in the state next door.

Here are some of the state tax changes:

Tax cuts and tax hikes. Massachusetts voters approved a constitutional amendment to establish an additional 4 percent surtax on income of more than $1 million, for a total top tax rate of 9 percent, effective Jan. 1. Massachusetts has had a flat income tax rate of 5 percent for more than 100 years, so adding a new rate for high-income taxpayers is a major shift for the commonwealth.

However, California’s left-leaning voters rejected a measure that would have imposed an additional 1.75 percent tax rate on income of more than $2 million, which would have resulted in a total top tax rate of 15.05 percent. The additional revenue would have increased funding for zero-emission vehicles and wildfire prevention.

Voters in Arizona, meanwhile, rejected a proposal to raise the state’s sales tax from 5.6 percent to 5.7 percent. Arizona voters also approved a constitutional amendment that will make it more difficult for the state to raise taxes in the future. Under the amendment, any ballot proposal to raise taxes must receive 60 percent of the votes to become law.

West Virginia residents rejected a proposal that would have allowed the state legislature to eliminate local taxes on vehicles and business equipment. Gov. Jim Justice and local officials opposed the measure, arguing that it would hurt county budgets.

Colorado residents voted for a tax cut and a tax hike. Voters approved an initiative that will cut the state’s flat income tax rate to 4.4 percent from 4.55 percent, effective for the 2022 tax year. But they also approved a measure that will limit state itemized deductions or the standard deduction for residents with federal taxable income of more than $300,000, effectively increasing taxes on those households.

Legal cannabis. Maryland voters approved a measure that will legalize marijuana for individuals 21 and older and allow the state to tax its use. (The rate wasn’t specified.) Similarly, Missouri voters approved a measure that will legalize the use of recreational marijuana for adults 21 and older and impose a 6 percent tax on marijuana sales.

However, voters in Arkansas, North Dakota and South Dakota rejected similar legalization measures.

Sports betting. Gambling on sports is big business and an attractive source of tax revenue, which is the main reason 31 states and Washington, D.C., allow sports betting and at least five other states are in the process of setting it up.

California voters bucked the trend, rejecting a proposal that would have allowed online betting across the state, along with another initiative that would have allowed in-person sports betting at tribal casinos and four private horse racing tracks.

(Sandra Block is a senior editor at Kiplinger’s Personal Finance magazine. For more on this and similar money topics, visit Kiplinger.com.)

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