November 5, 2020
Various state and local tax-related ballot measures approved or rejected on November 3rd
On Tuesday, November 3, 2020, voters across the US considered various state and local ballot measures on state and local taxes. Both California's Proposition 15 (which would have amended the state's constitution to allow the regular reassessment of commercial and industrial property) and a proposed Illinois constitutional amendment (which would have allowed a graduated income tax) appear to have failed.1 Voters in San Francisco, however, passed four tax-related ballot measures, including measures to reform the city's business tax and to implement a CEO-pay-ratio tax. Voters across the country also approved tax-rate changes (both increases and decreases), new marijuana taxes and various property-tax measures. Only a handful of the tax-related ballot measures were rejected.
Below is a list of the tax-related ballot measures that were approved, followed by a list of tax-related ballot measures that were rejected.
Approved ballot measures
Arizona: Proposition 207 legalizes sales of recreational marijuana and imposes a 16% excise tax on those sales. Revenue from the tax will fund public programs such as community colleges, infrastructure, public safety and public health initiatives.
Arizona: Proposition 208 appears to have passed. 2 It imposes a 3.5% additional income tax on individual income exceeding $250,000 for single persons or married persons filing separately or $500,000 for joint filers or heads of household, to fund education spending.
Arkansas: Issue 1 makes permanent a 0.5% sales tax earmarked for transportation-infrastructure spending.
California: Proposition 19 appears to have passed.3 It changes how family-property transfers are taxed by limiting property-tax savings only to inherited properties used as primary homes or farms. In addition, homeowners who are over 55, disabled or victims of wildfire/disaster can transfer their primary residence's tax base to a replacement residence.
California: Proposition 22 changes employment classification rules for app-based transportation and delivery drivers by classifying them as independent contractors rather than employees.
San Francisco, CA: Proposition F reforms the city's business tax. The measure increases the city's gross-receipts tax while phasing out the city's payroll tax in 2021. The measure also includes temporary tax relief for restaurants, retail and manufacturing businesses, hotels and arts organizations on their first $25 million in gross receipts and increases the threshold for a small-business exemption from the gross receipts tax to $2 million. See Tax Alert 2020-2107.
San Francisco, CA: Proposition I increases the transfer tax on real property based on value. Specifically, it amends the San Francisco Business and Tax Regulations Code to increase real-property transfer-tax rates to: (1) 5.5% (from 2.75%) on transfers of properties with a consideration or value of at least $10 million and less than $25 million; and (2) 6% (from 3%) on transfers of properties with a consideration or value of at least $25 million. With the passage of Proposition I, San Francisco will have the highest real-property transfer-tax rate in California and one of the highest transfer-tax rates in the US. See Tax Alert 2020-2117.
San Francisco, CA: Proposition J repeals the annual parcel tax in the Living Wage for Educators Act of 2018 (which, as of July 1, 2021 would be $320 plus a one-year consumer price index adjustment) and replaces it on July 1, 2021, with an annual $288 parcel tax under the "Fair Wages for Educators Parcel Tax Ordinance." The tax applies to real property located in the city and will expire after June 30, 2038.
San Francisco, CA: Proposition L imposes an additional gross-receipts tax on large businesses, with a rate that progressively increases based on the ratio of the pay of the highest-paid executive to the business's median employee pay (CEO pay-ratio tax). See Tax Alert 2020-2107.
Colorado: Proposition 116 decreases the income-tax rate for corporations and individuals from 4.63% to 4.55%, starting with tax years beginning on or after January 1, 2020.
Colorado: Amendment B repeals the Gallagher Amendment, which constitutionally mandated a 45%-residential-to-55%-non-residential-property-tax-assessment split, and triggers legislation (S.B. 20-223) to establish statutory assessment rates.
Colorado: Proposition EE increases the state's cigarette and tobacco taxes and imposes a new tax on other nicotine products.
Denver, CO: Measure 2A increases the city's sales-tax rate by 0.25%, commencing January 1, 2021, with revenue intended to fund programming to reduce the city's carbon footprint. Items exempt from this tax include food, water, fuel, medical supplies and feminine-hygiene products.
Denver, CO: Measure 2B increases the city's sales-tax rate by 0.25%, commencing January 1, 2021, with revenue intended to fund homelessness services. Items exempt from this tax include food for home consumption, water, fuel, medical supplies and feminine-hygiene products.
Florida: Amendment 2 gradually increases the state's hourly minimum wage to $15 by September 2026. On September 30, 2021, the current rate will increase to $10 per hour. Thereafter, it will increase by $1 per hour each year until it reaches $15 per hour on September 30, 2026. Starting September 30, 2027, the minimum wage will increase annually based on inflation.
Georgia: Amendment 1 authorizes the state legislature to enact taxes and fees to provide dedicated funding for specific public projects without requiring the legislature to appropriate that revenue from the general fund in later years.
Louisiana: For purposes of assessing oil and gas wells, Amendment 2 allows the inclusion of the presence or production of oil or gas in a well to be taken into account in determining the well's fair market value for ad valorem tax purposes.
Maryland: Question 2 authorizes sports betting and earmarks the tax revenue from those betting activities for education funding.
Montana: I-190 legalizes and imposes a 20% tax on sales of nonmedical marijuana.
Nebraska: Amendment 2 amends the Tax Incremental Financing program to increase the repayment period from 15 to 20 years when more than one-half of the properties are designated as extremely blighted.
Nebraska: Initiative 431 imposes an annual 20% tax on gross gaming revenue generated by authorized operators of games of chance within licensed racetrack enclosures.
New Jersey: Public Question 1 legalizes and imposes a 6.625% sales tax on sales of recreational marijuana, effective January 1, 2021.
Oregon: Measure 108 increases the cigarette-tax rate from $1.33 to $3.33 per pack and will tax e-cigarettes at 65% of the wholesale price, effective January 1, 2021.
Multnomah County, OR: Measure 26-214 establishes a tuition-free preschool program and funds the program by imposing, effective January 1, 2021, an additional 1.5% income tax on an individual's taxable income over $125,000 (single) or $200,000 (joint). The tax rate increases to 2.3% on January 1, 2026. An additional 1.5% tax applies to taxable income over $250,000 (single) and $400,000 (joint). Thus, for higher wage earners, the total additional tax rate would be 3%, increasing to 3.8% in 2026.
South Dakota: Constitutional Amendment A legalizes and imposes a 15% tax on marijuana sales.
Seattle, WA: Proposition 1 replaces the current car-license fee and 0.1% local sales tax with a 0.15% sales tax for transportation funding. The 0.15% tax takes effect April 1, 2021, and expires on April 1, 2027.
Rejected ballot measures
Alaska: Measure 1 would have increased taxes on certain oil-production fields in the North Slope with a lifetime output of at least 400 million barrels of oil and an output of at least 40,000 barrels per day in the prior year.
California: Proposition 15 would have amended Article XIIIA of the California constitution (Proposition 13) to require local assessors to value most commercial and industrial real property at fair market value on a regular cycle while preserving Proposition 13's protections for residential property owners.
Illinois: "Proposed Amendment to the Illinois Constitution" would have allowed the state to impose a progressive rate structure on the individual income tax. Legislation enacted in 2019 authorizing this ballot initiative proposed amending Illinois's state constitution to permit graduated income-tax rates for individuals. In addition, a "yes" vote would have increased the corporate income tax's flat rate from 7% to 7.99%.
Louisiana: Amendment 5 would have allowed local taxing authorities to enter "cooperative endeavor agreements" with new and expanding manufacturers, permitting direct payments to local governments in lieu of property taxes.
Multnomah County, OR: Measure 26-218 would have imposed a new payroll tax, at a rate of up to 0.75% of wages, on employers in the Portland metropolitan area with more than 25 employees. Revenue from this tax would have been dedicated to mitigating pollution and climate change.
1 Election results are being certified. As of the noon (EST) on November 5, 2020, Ballotpedia reported the vote count for California Proposition 15 as 48.31% yes and 51.69% no.
2 Election results are being certified. As of noon (EST) on November 5, 2020, Ballotpedia reported the vote count for Arizona Proposition 108 as 52.21% yes and 47.79% no.
3 Election results are being certified. As of noon (EST) on November 5, 2020, Ballotpedia reported the vote count for California Proposition 19 as 51.49% yes and 48.51% no.