Voters split on tax initiatives

By Tami Luhby, senior writer


NEW YORK (CNNMoney.com) -- Voters on Tuesday were at the center of a high-stakes tug-of-war between lawmakers and anti-tax advocates.

More than a quarter of the 160 initiatives on the ballots deal with state tax hikes, debt levels and other revenue issues. In total, there are 44 measures that could drastically change the way states fund themselves or make decisions on their budgets.

Anti-tax crusaders have long used ballot measures to keep lawmakers in check, but this year the two sides are wrestling with how to close monstrous budget gaps. State and local officials have had to raise taxes and slash services over the past three years in order to balance their budgets.

Citizens frustrated with the hikes are trying to overturn them or limit future ones. Targets include state levies on candy, soda and alcohol. They are also trying to keep state and local officials from hiking property taxes and issuing new debt.

In Massachusetts, for instance, a move to repeal the sales tax on alcohol passed, but an effort to reduce the sales tax rate from 6.25% to 3% failed.

But in a few cases, voters will decide whether to raise taxes in order to fund education, health care, parks and other services. In Georgia, voters narrowly voted not to add a $10 fee on car registrations to pay for trauma care.

Three of the biggest showdown states this November were Colorado, Washington and California.

Colorado: A trio of fiscal measures in the Centennial State that would have drastically changed the way it funds itself went down to defeat.

Currently, public education in Colorado is paid for through a mix of property taxes and state aid. But a ballot initiative would have cut property taxes in half over 10 years and then use state money to fund schools.

The measure would require the state to come up with $1.5 billion for public schools each year, eating up most of the state's budget, according to state estimates.

Another ballot measure would have banned all state borrowing and require voter approval for localities to borrow money by issuing debt. Colorado currently borrows about $3 billion annually, while local governments issue $5 billion in new debt each year.

The final initiative that failed for slashing the state income tax rate to 3.5%, down from 4.63%, and for reducing or eliminating taxes and fees on cars and telecommunication services. This would cut state revenues by $2.9 billion.

Washington: Earlier this year, state lawmakers voted to subject candy and bottled water to sales taxes to help close a projected $3 billion budget shortfall. The legislature also imposed a 2 cent tax on carbonated beverages.

But residents voted to repeal those tax hikes on Tuesday. The measure will cost the state $352 million in revenue and localities $83 million over five years.

A ballot measure that passed restored the rule that tax increases be approved by two-thirds of lawmakers. The state legislature temporarily suspended this requirement, which was instituted by voters in 2007, to make it easier to put through tax hikes to balance the budget.

Washington residents voted overwhelmingly not to tax their wealthier compatriots. The initiative called for establishing an income tax of 5% on single taxpayers earning $200,000 or more and a 9% rate on income above $500,000 -- the threshold would be doubled for married Washingtonians. The initiative would also have reduced property taxes by 20% and lowered certain business taxes.

The income tax revenue would have been used to fund education and health care, which advocates said, would provide relief for the middle class. It was expected to raise $11.2 billion for the state over five years.

California: Conservationists were unable to get an $18 annual surcharge on all vehicles to fund state parks and wildlife conservation programs. If it had been approved, cars would have entered the parks without paying daily fees, which are typically charged for use of the pools, boat launches and parking facilities. The measure would have saved the state $200 million.

Two measures that were approved deal with how many lawmakers need to approve the budget and fee increases in the perennially cash-strapped state.

One ballot initiative lowered the number of lawmakers needed to pass a budget to half, from two-thirds, to make it easier to approve the spending plan. The other required a two-thirds vote in order to pass hikes in fees.

California went more than three months without a budget this year as lawmakers wrangled over a $19 billion budget deficit.

There's one source of taxes that the state won't be tapping: marijuana. Voters rejected the idea of legalizing, regulating and taxing marijuana by a 54% to 46% margin. To top of page

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