Any way you look back on it, 2013 was an eventful year. From Edward Snowden revealing classified information on the NSA, to Miley Cyrus scorching our retinas during the Video Music Awards, to Washington’s own football team crashing and burning on the gridiron, there was never a dull moment. The same was true for taxpayers, who in some states and localities saw pro-growth reforms enacted, while others experienced harmful tax hikes and new onerous regulations. Here are the top five highlights and lowlights for taxpayers from the past year.
The highlights:
1. North Carolina’s historic tax reform
This past summer, National Taxpayers Union (NTU) and many fiscal groups applauded the North Carolina General Assembly and Governor for enacting the most significant tax reform package of 2013. The “Tax Simplification and Reduction Act” replaced North Carolina’s three-tiered personal income tax with a lower flat rate, reduced the corporate income tax, eliminated the death tax (Indiana also nixed its inheritance tax this year), and placed a cap on the state gas tax. Families and businesses across the Tar Heel State are certainly looking forward to these lower rates in the new year.
2. Colorado Amendment 66 defeat
The pundits kept claiming they were becoming increasingly moderate in their political outlook, taxpayers in “purple” Colorado nonetheless emphatically rejected the $1 billion income tax hike that appeared on the Centennial State’s November 5th ballot. Backers of Amendment 66 were left scratching their heads after spending roughly $10 million (opponents spent a measly $30,000), only to see the measure get thrashed at the polls by a 2 to 1 margin.
3. Balanced Budget Amendment (BBA) convention application passed in Ohio
With strong grassroots pressure and bipartisan support, the Ohio Legislature passed a Balanced Budget Amendment (BBA) convention application, increasing the number of states with BBA resolutions from 19 to 20 and that much closer to the 34 states required to hold an assembly that would draft and propose a federal constitutional safeguard against runaway deficit spending. Less than a month later, state lawmakers from thirty-two states met at George Washington’s estate for the Mount Vernon Assembly to strategize about a possible convention of the states to amend the Constitution to include a BBA.
4. Eighteen states cut taxes
The American Legislative Exchange Council recently released its 2013 State Tax Cut Roundup, which found eighteen states that cut taxes in the past year. According to the report, “Nearly one quarter of the 25 tax cuts were to the personal income tax, followed by reductions to various state specific taxes and to the corporate income tax.” States that successfully cut personal income taxes in 2013 include Arkansas, Indiana, Iowa, Kansas, North Carolina, Oklahoma, Ohio, and Wisconsin. (There was one discouraging note: Oklahoma’s cut was just deemed unconstitutional under state law by the Oklahoma Supreme Court.)
5. Soda “sin” taxes rejected, again
The Amendment 66 defeat wasn’t the only good news out of Colorado on November 5. In Telluride, 68 percent of voters rejected a regressive penny-per-ounce soda tax, leaving backers grasping at straws to explain their defeat (how about the fact that voters of all political stripes tend to hate Nanny-State tax schemes?). In November 2012, similar measures were shot down in Richmond and El Monte, California. All three of these cities gave President Obama strong support in his reelection, yet sent the soda tax hikers packing. But rest assured, they’ll be back in 2014 with more penny-per-ounce ballot measures.
The lowlights:
1. The nightmare Virginia transportation tax hike
Governor Bob McDonnell (with the help of the Virginia General Assembly) squandered whatever remained of his conservative credentials when he pushed and signed the $5.9 billion transportation tax hike earlier this year. The new law raised the Virginia sales tax from 5 to 5.3 percent (6 percent for Northern Virginia and Hampton Roads), implemented a 3.5 percent wholesale gas tax and 6 percent tax on diesel fuel, and raised car registration fees. To make matters worse, the Governor’s tax hike package relies on congressional passage of dangerous online sales tax legislation to reach even deeper into Virginia taxpayers’ wallets.
2. Minnesota cigarette and income tax hikes
In May, Minnesota’s Governor Mark Dayton signed a $2.1 billion tax hike package that included a major income tax increase, a reliance on federal passage of a new tax on online goods, and a 130 percent spike in the state’s cigarette tax (from $1.23 to $2.83 per pack). He advocated for the latter despite stating in 2010, “You raise the pack of a pack of cigarettes $1.50 … that’s money out of the pockets of working people and poorer people, and that means kids don’t have as much to eat or don’t have the same quality of food.” Under this tax bill, Minnesotans who make $150,000 or more per year now face a 9.85 percent personal income tax rate — the highest rate in the Midwest and the fourth-highest rate nationwide — up from 7.85 percent.
3. Republican Governors support Medicaid expansion
In 2013, a handful of Republican Governors either signed into law or announced their support of costly (and optional) Obamacare Medicaid expansion, including Brewer (AZ), Snyder (MI), Christie (NJ), Martinez (NM), Dalrymple (ND), Kasich (OH), and Scott (FL). Governor Kasich famously attempted to claim the moral high ground by insinuating that God wanted him to expand Medicaid. But Medicaid expansion isn’t just fiscally irresponsible — its beneficiaries aren’t all that much healthier than the uninsured, according to a groundbreaking study of Oregon’s Medicaid program. Conservatives concerned about America’s fiscal future won’t soon forget these Governors’ support of the president’s dangerous health care law.
4. Minimum wage increases
On November 5, New Jersey voters approved a statewide minimum wage hike to $8.25 an hour, up from the federal rate of $7.25. In SeaTac, Washington, voters also approved a minimum wage increase by a razor thin margin (the final result is facing a recount), from the state rate of $9.19 to an outlandish $15 an hour. This sets a dangerous precedent for the rest of the country, and other states and cities (Maryland and the District of Columbia, for example) are considering similar hikes. Unfortunately, minimum wage increases typically reduce overall employment by making unskilled and young workers more expensive to hire.
5. The rise of e-cigarette bans
On December 19, the New York City Council voted to ban e-cigarette use in places where smoking is prohibited. In September, the City Council in Duluth, Minnesota enacted a similar ban. These aren’t just classic examples of overregulation — they are moves that discourage the use of a tobacco-free product that can reduce risk of tobacco-related death or illness by 98 percent or more, according to Dr. Joel Nitzkin of the R Street Institute. Small town Ada, Oklahoma, took things a step further this year by banning e-cigarette use on public property, essentially making all sidewalks vapor-free zones.
These are just a few of the major tax and regulatory moments of 2013. And, all indications are that 2014 promises to be an equally eventful year for state and local tax reform. Through it all, advocacy groups like National Taxpayers Union and its allies in communities across the country will be fighting for citizens who pay government’s bills.