Taxpayer Revolts Are Brewing

Yahoo!Finance is reporting A Tax Revolt Is Quietly Brewing in Some States.

On Election Day, Massachusetts will vote on whether to eliminate its state income tax. Advocates hope victory in a place long thought of as a free-spending liberal bastion will pave the way for similar initiatives in other states over the next few years. Critics insist a yes vote would lead to fiscal disaster.

Oregon voters will decide whether to allow taxpayers to deduct an unlimited amount of their federal income taxes on their state returns. Nevada is expected to vote on a constitutional amendment that would restrict property-tax increases. North Dakota voters may vote on whether to chop the state's personal income tax in half. And Minnesota will vote on a proposed amendment to its state constitution to raise the state sales tax by three-eighths of a percentage point, with the money going to protect the environment and to benefit the arts.

Here is a look at a few of the most high-profile tax battles:

Massachusetts. The issue is whether to erase the state's income tax in two phases. The 5.3% tax would be sliced in half next year and then disappear entirely the following year. Advocates of repeal are hoping for support from voters worried about tough economic times and angered by bloated government spending. Six years ago, a similar proposal attracted 45% of the vote.

Eliminating this tax "will mean less money in the hands of politicians and will give back an average of $3,700 to each of 3.4 million workers and taxpayers in Massachusetts -- not just once but every year," says Carla Howell of the Committee for Small Government, a nonprofit citizen group battling to repeal the tax. "There are tax-cut activists around the country who are very interested in what we're doing here," she says. "If it does well, we may see copycat initiatives in 2010 and 2012 across the country."

Grover Norquist, president of Americans for Tax Reform, a Washington-based coalition of taxpayers and taxpayer groups opposed to tax increases, agrees. The Massachusetts vote, officially dubbed "Question One," "could be a model for the future" in many other states, he says.

Massachusetts Gov. Deval Patrick, a Democrat, has been "very clear" in his opposition to repeal of the state income tax, says Rebecca Deusser, a spokeswoman. "A cut of this magnitude would severely reduce the ability of the Commonwealth to provide the services that citizens and taxpayers have come to expect from their state government," she says.

My Take: It appears citizens in many states are fed up paying exorbitant salaries to public workers with benefits that far exceed the private sector. It's about time.

Nevada. Voters are focusing on a proposed constitutional amendment that would impose a new cap on property-tax increases. Generally, the measure would cap property tax at 1% of the taxable value of the home for the 2003-04 fiscal year, and would also limit property-tax increases to only 2% a year (or the cost of living, whichever is less), until the property is sold.

Voters would have to approve the proposal not only this year but also in 2010 in order for it to become effective. Nevada's secretary of state recently certified the proposal for inclusion on the ballot, but it still may face a legal challenge. A spokesman for Gov. Jim Gibbons, a Republican, says the governor "hasn't taken a position at this point" on the proposal.

"We need stable and predictable property taxes," says Sharron Angle, a former state legislator who heads We the People Nevada, which drafted and is advocating passage of the amendment. She says many voters have complained that their property taxes have risen even though home values have declined. She also says there is interest in several other states, including Arizona, in proposing similar property-tax caps.

My Take: This is the first I have heard of laws that had to be passed twice to be enacted. The Nevada Bill also has a major flaw. That flaw is in the provision "until the property is sold". Such provisions create an enormous inequity between taxes paid on very similar or even identical houses over a period of time. Why not index to 2003, put in a cap, and be done with it?

Other states. In North Dakota, efforts are being made to place a proposal on the ballot that includes cutting personal income-tax rates by 50%. Colorado will vote on whether to increase the state's sales tax to fund services to people with "developmental disabilities." The state may also vote on major changes to its taxpayer bill of rights law and the manner in which the state funds public education through 12th grade.

My Take: I applaud North Dakota while noting Colorado is way out of step here. There is no way the Colorado bill passes and no way it should pass.

Citizens need to be prepared for massive government warnings about reduced services coming up. Voters should stick to their guns. Six years ago Massachusetts garnered 45% support for this proposal. I predict it passes this time.

People are fed up, and rightfully so. States will either have to cut services or raise other taxes. Let's hope they react wisely and cut services. Getting rid of government bureaucrats and privatizing some services would also help.

Many cities and states are in trouble over promises that simply cannot be met. Absurd salaries and benefits pushed Vallejo, California into bankruptcy. Public Sector Salaries In Illinois are ridiculous. Those are just two examples. Greed, fraud, corruption, and overpaid bureaucrats are practically anywhere you look.

It's time for citizens to take action, and in many states they are. In general, I applaud these efforts to put a stop to governmental squandering of taxpayer money. Now, if we can only get a balanced budget out of US Congress. Sadly, this just was not Ron Paul's year.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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