Tax Hikes for Big Earners, Companies on State Ballots Next Week

Voters in several states will head to the polls next week to decide whether high-earners and big corporations should get a higher tax bill.

Colorado and Maine are looking to raise income taxes on many taxpayers who make six figures or more per year. Meanwhile, in California, companies in San Francisco and Silicon Valley could see higher tax bills if voters approve local ballot measures.

The tax initiatives would be lucrative for state and local governments. The Colorado Legislative Council estimates that a ballot measure to replace that state’s flat income tax with a new five-bracket system would generate $1.6 billion in additional revenue in the first full year of implementation.

The Colorado measure, proposed constitutional amendment 73, would leave the income tax rate at 4.63 percent for individuals earning less than $150,000 per year—nearly 92 percent of individual taxpayers in the state. Those earning more would pay between 5 percent and 8.25 percent on income above that threshold.

Below-Average School Funding

Supporters, including the state’s leading teacher’s union and the state Parent Teacher Association, argue the tax hike is necessary to better fund education.

“Colorado’s per-pupil funding is $2,800 below the national average, and more than half the school districts are on 4-day weeks because they don’t have any money,” Martha Olson, a volunteer for the Yes on Amendment 73 campaign, told Bloomberg Tax. “A state with an economy as strong as Colorado should be putting more money into education.”

Opponents of the measure argue the tax changes would harm the state’s economy, result in higher property taxes for most Colorado homeowners, and not guarantee increased academic achievement because the state has increased education funding in recent years without increasing taxes.

The ballot measure also would cut school district assessment rates beginning in 2019. Those cuts would be to 7 percent from 7.2 percent for homeowners and to 24 percent from 29 percent for nonresidential taxpayers.

Opponents of the measure argue that is a tax hike on homeowners because the 2019 residential rate is projected to be 6.1 percent.

Millions for Maine Seniors

Maine voters also will weigh a tax hike for high-earners, though the increased revenue would be used for seniors, not schools.

The ballot initiative, Question 1, would create a program to provide in-home and community support services to the state’s elderly and disabled.

The program would be funded by a 3.8 percent tax on wages and combined household income on taxpayers who made more than $128,400 in 2018. That tax hike would raise $315 million per year, according to the Office of the State Economist.

The group pushing the initiative, Mainers for Homecare, is led by the Maine People’s Alliance and has the support of the Maine AFL-CIO, health care organizations, and community groups.

“Maine is the oldest state in the country, and rapidly getting older,” alliance spokesman Mike Tipping told Bloomberg Tax. “We wanted to create a guarantee that people who want to stay in their homes can afford to do so.”

The state’s largest business group, the Maine State Chamber of Commerce, called the tax in Question 1 “the largest tax increase in Maine’s history” and has urged its members to vote no. Gov. Paul LePage (R), who is term limited and can’t run for re-election this year, also is opposed to the measure.

“We have worked hard to bring prosperity to Mainers, and now, when wages are rising, Question 1 will send us backward,” LePage said in an Oct. 10 radio address.

All three candidates running to succeed LePage as governor—Democrat Janet Mills, Republican Shawn Moody, and independent Terry Hayes—are opposed to the measure.

Business Taxes in California

Big companies, not individual taxpayers, are the focus of a pair of local California ballot initiatives.

Google LLC would pay millions of dollars in additional taxes under a proposed head tax in the Silicon Valley city of Mountain View. Measure P would establish a flat $75 business license fee and incremental fees of $5 to $150 per employee based on the company’s size.

Mountain View argues the initiative would bring in much needed money to the general fund and support transportation in the increasingly congested city. Google, the city’s largest employer, would pay more than half of the projected $5.9 million in annual taxes that would be collected under the head tax.

Meanwhile, in San Francisco, voters will decide whether to boost funding for homeless services through a special tax on companies with annual revenue of more than $50 million.

The ballot measure would generate up to $300 million in additional tax revenue per year, according to a statement from City Controller Ben Rosenfield. A new additional gross receipts tax of between 0.175 percent and 0.69 percent would affect about 300 to 400 businesses, Rosenfield said.

There are large employers on both sides of the issue: Salesforce.com CEO Marc Benioff is supporting Proposition C, while Twitter co-founder and Square CEO Jack Dorsey is joining Mayor London Breed in opposing the measure.

“I want to help fix the homeless problem in SF and California,” Dorsey said in an Oct. 12 tweet. “I don’t believe this (Prop C) is the best way to do it.”

That position drew critical replies from Benioff, who questioned what Dorsey and Twitter have done to support the city’s homeless.

“If you’re going to fight a relatively small tax, which is one half of one percent to help our number 1 issue, then you better prepared to talk about what you are doing versus what you don’t want to do,” Benioff said.

North Carolina Goes the Other Way

North Carolina voters won’t be asked to boost taxes on the wealthy on Election Day—instead they will consider whether to constitutionally cap the state’s personal income tax rate at 7 percent.

The proposal wouldn’t have an immediate impact on tax rates—the state’s personal income tax rate is already set to drop in 2019 to 5.25 percent. The lower cap would make it more difficult for the Legislature to raise income taxes in the future.

North Carolina State Treasurer Dale Folwell (R) said lowering the current 10 percent constitutional income tax rate cap would provide better certainty to businesses thinking of relocating to the state.

Opponents of the measure, including the North Carolina NAACP and North Carolina Justice Center, argue that the cap could lead to more regressive taxes in the future to increase revenue, such as sales and property tax increases.