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BALLOT INITIATIVES
Taxing by Ballot
More than three decades after California voters approved Proposition 13 to limit property taxes in the state, voters in North Dakota had the opportunity to take that concept a step further and eliminate their property taxes altogether.
“There were a lot of property owners that were upset about the growth of their property tax rates and the size of government,” said North Dakota House Speaker David Drovdal.
That led to a ballot initiative in June that would remove the property tax entirely in North Dakota; it would have been the first state in the country to do so. As it turns out, North Dakotans were more worried about the potential consequences of such a move than their bottom lines—more than 76 percent voted against the measure.
The use of ballot initiatives to decide big fiscal issues—like placing limits on tax rates or raising them—has been a popular strategy in recent years, for both legislators who would not have to make possibly unpopular votes and for advocacy groups that see an opportunity to convince voters directly.
Letting Voters Decide
In Arkansas, Rep. Jonathan Barnett cites the “anti-tax mood” of the public to explain why he pushed for a transportation funding initiative to be placed on the November ballot rather than asking legislators to vote for a tax increase in such a politically volatile atmosphere.
“Legislators aren’t willing to make these major tax increase decisions out of a fear of too much fallout at the ballot box,” said Barnett.
Barnett said the need to increase funding for infrastructure improvements outweighed the difficulty of breaching the topic by Jennifer Horne and Jennifer Burnett
of a tax increase.
“Existing methods of financing highways—the gas tax—are not working anymore. At the same time, the cost of building and maintaining roads has increased,” he said.
The Arkansas measure would raise the sales tax by half a cent, with the revenue used to issue bonds to fund up to $1.8 billion in road construction and improvements, including the creation of a four-lane highway system throughout the state. The measure is projected to raise $160 million annually for state highways and $34 million each for cities and counties.
Barnett worked hard to convince legislators, including his fellow Republicans, to let the people decide whether to increase the tax.
© AP Photo/Dale Wetzel
It’s not just legislators who see the value in asking the public to vote on fiscal and tax measures.
After the South Dakota legislature made significant cuts to both education and Medicaid in 2011, advocates drafted an initiative to raise the sales tax by 1 cent, with the additional revenue going to K–12 education and Medicaid providers. Supporters estimate the tax increase would raise $175 million annually.
Andy Wiese, campaign director for Moving South Dakota Forward, the coalition that sponsored the measure, believes the accountability built into the ballot measure will help to increase support among voters. The new revenue is not mingled with the general fund. “They realize that this revenue is going to go where we intend it to go—to education and Medicaid providers,” said Wiese. “The education money will go directly to school districts on a quarterly basis. The Medicaid money will be distributed directly to providers. This should give voters comfort that the money will only be used for education and Medicaid.”
Starting a Conversation
A positive byproduct of taking budget concerns to the ballot is increased discussion between the public and legislators on fiscal issues. In North Dakota, although the property tax initiative failed, the process started a bigger conversation with the public about property tax issues.
When an initiative is approved to appear on the ballot in North Dakota, the legislature is required to hold hearings and issue a report analyzing the potential impact of the measure.
“We learned from the hearings that one of the reasons that the initiative made it on the ballot in the first place is that people felt that big businesses were getting an unfair advantage over the mom and pop stores from property tax breaks given out at the local level,” said Drovdal. “Based on the feedback from those hearings, we ended up passing legislation to limit some of those tax breaks.”
Reports issued by the legislature also showed that local governments rely heavily on property taxes. If the property taxes were removed, the state would have to step in with funds to replace the lost tax revenue so schools and police departments could continue to function—a fact that ultimately led to the ballot’s failure.
“A large coalition of businesses and residents mobilized to make sure people realized that eliminating the property tax meant taking away a lot of control from local governments and giving it to the state,” said Drovdal.
In Arkansas, Barnett hopes the effort to educate the public on the need for increased transportation funding will spark a greater understanding of the challenges facing the state.
Wiese agrees the ballot process can be used as a platform not just for making decisions, but also for educating the public.
“There is value in taking our message directly to voters and having the opportunity to really talk about the need for increased revenue with the entire state,” he said.
The California Conundrum
© Sandy Huffaker/Corbis
California voters will decide two competing ballot measures that focus on taxes. How Californians vote on the measures will create a number of different scenarios.
Proposition 30 would temporarily increase the state sales tax and the personal income tax rate on individuals earning more than $250,000 a year and couples earning more than $500,000 a year. The money generated, estimated from $6 billion to $9 billion annually, would be spent on general state services, including public education. Rejection of the initiative would trigger $6 billion in spending cuts, including $5.3 billion cut from public schools.
A competing measure, Proposition 38, would temporarily raise state income tax rates, increasing revenues by approximately $10 billion annually. The majority of the revenue would be earmarked for public schools and early childhood development programs.
If both measures pass, the measure that receives more votes would take effect. If Proposition 38 passes and Proposition 30 fails, the automatic spending cuts would still take effect.
Learn more about other states’ ballot measures at the Capitol Ideas website.
TAXES ON THE BALLOT
Andy Peterson, president of the North Dakota Chamber of Commerce, left, spoke at a February news conference held by opponents of a proposed constitutional amendment that would abolish property taxes in North Dakota at the chamber’s headquarters in Bismarck. Peterson was a spokesman for a group of organizations that believed the amendment, called Measure 2, would strip local governments of control over their finances. The measure failed at the ballot box. California Gov. Jerry Brown, above, spoke in August to supporters at City College in San Diego on the first day of school to lobby for Proposition 30, which will be on the November ballot and asks for a small tax on wealthy individuals to help finance education spending.
INSIGHTS AND INNOVATIONS
Kansas Senate Majority Leader Jay Scott Emler, the 2012 chair of The Council of State Governments, believes states should work together on economic development. His Chair’s Initiative this year focuses on business incentives that may help one state, but really don’t help the overall U.S. economy. “We want to get down to how states can work together to grow the overall pie, rather than fighting about how we are going to divide up the slices,” he said. CSG also recognized distinguished service to the states and brought new leaders together for the 2012 Henry Toll Fellowship Program.
