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A Quiet Tax Revolution Is Sweeping Through States on Ballot InitiativesBy Peter Cleary Investor's Business Daily 4/17/00 In the course of today's Tax Day ritual, the Internal Revenue Service estimates Americans will spend 6.1 billion hours complying with the tax code and pay more than $1.9 trillion in taxes this year. Those taxes make up more than 20% of gross domestic product. That's higher than at any time in American history, except at the peak of World War II. Yet this does not seem to concern voters - or so say the polls. Indeed, when pollsters ask what voters see as the single most important problem facing government, the answer is education, health care, moral values, Social Security or Medicare. All those issues have routinely polled higher than taxes. So, the pundits have concluded that the nation is in no mood for a tax revolt. The Initiative & Referendum Institute, a nonpartisan Washington-based think tank, says those conclusions are dead wrong. Twenty-four states have some form of an initiative or referendum process in which voters decide directly the fate of public policy. The issue that voters are asked most often to decide on is tax policy. According to IRI research, the passage rate of anti-tax measures is up sharply from when the nation was in a tax revolt. That revolt was sparked in 1978, when California voters adopted Proposition 13, a measure that slashed property taxes and made it harder to raise local taxes. The tax revolt then swept anti-tax candidates like Ronald Reagan into office nationwide in 1980. During that revolt, the passage rate of anti-tax ballot measures was 13 out of 30, or 43%. From 1996 through last month, the passage rate of anti-tax measures was 8 of 12, or 67%. And this fall, voters across the country will have more chances to take up arms in this new tax revolt. A record 65 statewide ballot measures on tax policy have been filed in 16 states: Alaska, Arkansas, Arizona, California, Colorado, Florida, Kansas, Massachusetts, Maine, Michiqan, Montana, Oklahoma, Oregon, South Carolina, South Dakota and Washington. Ten of these measures have already qualified for the November ballot. The deadlines by which the other 55 measures must qualify for the ballot are months away. "This is strong evidence that the nation is in the middle of a tax revolt," said Dane Waters, president of IRI. "Indeed, the recent voter approval of Washington's I-695 can be seen as the shot heard around the world for the '00s, as California's 1978 Proposition 13 was for the '80s." I-695, which passed in Washington state last fall, was the most sweeping anti-tax measure ever approved in the U.S. Not only did it slash the state's car registration fee to a flat $30; it also required that voters had to approve any new tax or fee increase proposed by the legislature. (Washington courts have since struck down I-695 as a violation of the single-subject requirement of propositions in the state.) So the question is: Will the anti-tax ballot measures reign supreme, or is the tax revolt over before anyone noticed it? One of the hottest measures to watch this fall is in Massachusetts – a state often derided as "Taxachusetts" because of the state's long history of high taxes. There, Republican Gov. Paul Cellucci has been pushing hard for an initiative that would cut the state income tax to 5% from 6%. According to the most recent polls, voters favor the measure by 72% to 18%. "We are clearly starting from a great base of support for the 'Roll It Back' campaign," Cellucci said. Yet the governor concedes he faces a tough battle to get the measure approved by voters. Cellucci predicts a strong effort by Massachusetts Democrats, media and others who will all but say people will die in the streets if taxes are cut. In the end, Cellucci predicts, Massachusetts voters will prove that there are legs to the tax revolt. But some argue that conditions that sparked the tax revolt in the '70s and '80s just aren't there now. That tax revolt was spurred by anger at an uncertain economy and high tax rates. Today the economy is booming and tax rates are considerably lower than 20 years ago. Treasury Department figures note that the average federal income tax rate on a family of four at the median income level was 7.5% in 1999, down from 11.8% at its peak in 1981. So why, then, are citizens voting more often for anti-tax measures? Two words: budget surpluses. As is the case with the federal government, the strong economy has flooded state coffers. Massachusetts alone has more than $4 billion in its rainy-day fund. "It's true that people seem to be upset by high tax rates," said Waters. "But what they are clearly saying is that Uncle Sam and the state governments have taken enough tax money and it is time to give some of it back." Further evidence the nation is in at least a mild tax revolt is seen in what has been happening in Washington, D.C., says Daniel Mitchell of the Heritage Foundation. He points to the 48 House Democrats who broke party lines last month to back the elimination of the marriage penalty. "If the Democrats feel that they have to vote for things like this, obviously it is attractive to voters," said Mitchell. Even though taxes don't make the top three hot issues in national polls, independent pollster John Zogby says there is no doubt people think government should return tax surpluses to taxpayers. "My polling shows that when you ask people if they feel they are paying too many taxes," Zogby said, ”a majority of voters agree and then support a refund for the overcharged taxes. This means that there is a clear opportunity to tap into this mood of the country." But so far, national politicians have not found a way to do so. "One of the problems is that Republicans talk in term of billions (of dollars), while voters think in terms of hundreds or thousands," said Zogby. "Republicans have not been effective in conveying what their tax cut means to the voters. M. Dane Waters |
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