PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Key Ballot Results in the States for Small Business

By at 21 November, 2020, 1:02 pm

by Raymond J. Keating-

Besides deciding the presidency and control of the U.S. House and Senate, voters in certain states on Election Day also weighed in directly on an assortment of policy measures that would impact their state’s economy, small businesses and competitiveness. Several of these key matters are highlighted below.

Illinois Voters Say No to Higher Taxes

For example, a measure in Illinois, if approved (with 60 percent required), would have eliminated the state constitutional protection prohibiting a graduated income tax. If voters had approved this measure, state legislators already had passed tax increases for 2021. Those would have included replacing the current flat personal income tax rate of 4.95 percent with a progressive income tax system, with rates ranging from 4.75 percent to 7.99 percent. And the corporate income tax would have increased from 7 percent to 7.99 percent. Add in the state’s personal property replacement tax of 2.5 percent, and the total corporate tax rate would go from 9.5 percent to 10.49 percent.

Fortunately, Illinois voters didn’t approve this destructive, anti-small business tax increase. This state constitutional amendment lost, with 53.3 percent voting “no” and 46.7 percent voting “yes.” So, given the need to hit 60 percent to pass, this was a resounding rejection by Illinois voters.

Colorado Votes for Lower Taxes

Colorado voters faced an odd choice given that the law heading into Election Day would have led to increasing the state’s income tax rate from 4.5 percent to 4.63 percent. A vote for Proposition 116 would have set the rate at 4.55 percent, with a “no” vote leaving the 4.63 percent rate in effect. Voters went for the lower tax rate by a vote of 57.9 percent to 42.1 percent.

California Voters Protect Small Businesses

Meanwhile, in California, Proposition 15 would have undone part of the historic Proposition 13 property tax measure by peeling off commercial properties to be assessed at market value. A “yes” vote would have resulted in large tax increases on businesses, including, of course, small enterprises. Voters rejected the measure by a vote of 52 percent to 48 percent.

Arizona Voters Boost the Top Personal Income Tax Rate

Finally, in Arizona, voters weighed in on increasing the state’s top personal income tax rate from 4.5 percent to 8 percent – a 78 percent increase in the rate – applied to incomes of more than $250,000 for single payers and $500,000 for those filing jointly. Also, the top rate thresholds would not be indexed for inflation. This measure (Proposition 208), seemingly designed to hit the bottom line of small businesses in the state, unfortunately passed with by 51.7 percent to 48.3 percent.

The irony in these results is that two “liberal” states and one that has been drifting in that direction rejected higher taxes. However, while Arizona is considered a more “conservative” state, voters approved a tax increase measure that will undo a great deal of positives achieved in recent years on the income tax front in that state. Arizona’s economy and competitiveness will take a hit accordingly.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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