Small Business and State Ballot Measures on November 8th

By at 26 October, 2022, 11:03 am


by Raymond J. Keating –

There always seems to be a lot on the line when Americans go to the ballot box each cycle, and 2022 is no different. Not only will majorities in Congress be decided, but there are state governorships and legislatures up for grabs. Of course, these individuals have significant influence over entrepreneurship and small business success via their decisions regarding, for example, tax and regulatory matters.

Voters in various states will have a direct say on a variety of issues affecting small businesses through state ballot measures. Consider a few of the most high profile (see roundups by the Tax Foundation and Ballotpedia).

Arizona already has a healthy check on politicians’ proclivities to impose higher taxes, as two-thirds majorities are required in the state legislature to impose or increase taxes. Proposition 132 would add a constitutional amendment requiring a 60 percent majority to impose or increase taxes via a ballot measure. This measure is pro-small business.

California has a sky-high state income tax rate, and Proposition 30 would impose a 1.75 percentage point surtax on upper incomes, with the top rate 15.05 percent. By the way, as the Tax Foundation points out, a separate law will remove the cap on a 1.1 percentage point payroll tax, which would further raise the top rate on wages and salaries to 16.15 percent. Of course, whenever one raises taxes on upper-income earners, the effects are never limited to only those earners. Instead, the impact is felt far and wide since upper-income earners tend to be business owners and investors. Resources are drained away from entrepreneurship, business and investment, which drive economic, income and employment growth, and funneled to an assortment of political endeavors. Astronomical state taxes also serve as obvious incentives to leave California for other states, and in fact, the Golden State has long excelled at exporting people. Our economy is deeply integrated, and governmental costs imposed on one group always affects others. This measure is anti-small business.

Colorado voters will get a chance to reduce the state’s income tax rate. Proposition 121 would reduce the income tax rate from 4.55 percent to 4.4 percent, and the cut, if passed, would be retroactive to the state of 2022. Anytime income tax rates are reduced, it’s good news in terms of incentives and resources for entrepreneurship and investment. This measure is pro-small business.

Massachusetts is a high-tax state with at least one obvious positive, that is, a constitutional flat tax. But that is being put at risk with Question 1, which, if approved by voters, would get rid of the constitutional requirement for a flat tax and impose a 4 percent surtax on top of the state’s 5 percent income tax rate. The ills now and in the future to entrepreneurship, investment, and competitiveness should be obvious if this measure were to pass. This measure is anti-small business.

Nebraska is far from a competitive state in terms of policy costs, and now voters will weigh in on Initiative 433, which, if passed, would make Nebraska even more costly and less competitive by imposing a minimum wage mandate that would increase the state’s minimum wage from $9 per hour to $15 per hour by 2026, and allow for annual increases thereafter tied to inflation. Compensation is based on productivity and value, not on the policy mandates. Increases in the minimum wage wind up reducing employment opportunities for young, inexperienced and low-skilled workers. For good measure, the costs of this mandate would hit small, labor-intensive small businesses hard. This is an anti-small business measure.

Tennessee voters will have the opportunity on November 8 to make the Volunteer State a right-to-work state. That is, Constitutional Amendment 1 would make it illegal for workplaces to require union membership as a condition of employment. This is a basic pro-worker right that would help both workers and businesses by expanding opportunity. This is a pro-small business measure.

West Virginia has an invasive, anti-investment tangible personal property tax, and Amendment 2 would alter the state constitution so that this tax could be reformed, or even eliminated, if state lawmakers sought to do so. That is, the amendment merely provides the state legislature with the authority to reform tangible personal property taxes (see Ballotpedia information and the Tax Foundation’s analysis). Passing this measure would make it easier for West Virginia to undertake broader tax reform that is much-needed in the state. This is a pro-small business measure.

So, just as is the case with choosing representatives, there are good and bad state ballot measures for voters to consider. It’s always wise to consider how such measures would affect entrepreneurship, business and investment, which in turn are central to economic growth and well-being. Let’s hope it is a good night for small business on November 8.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.


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