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: Voters rejected more taxes in Colorado and Washington — what does that mean for Biden’s agenda?

In Washington, the home of tech titans like Amazon
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founder Jeff Bezos and Microsoft
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co-founder Bill Gates, residents said in a non-binding vote that the state should not be assessing a capital gains tax on high earners.

In Colorado, voters rejected an extra 5% excise tax on cannabis sales as a way to fund out-of-school tutoring and enrichment.

Election Day 2021 has been seen as a harbinger of the political mood outside of Washington D.C., where Democratic lawmakers are wrangling over a spending bill to strengthen the social safety net that could increase taxes on the rich and corporations.

A lot of focus has been on governor races in Virginia and New Jersey. In Virginia, Glenn Youngkin, a Republican, beat Terry McAuliffe, a Democrat, and in New Jersey, there was a very thin margin between Phil Murphy, the Democratic incumbent, and Jack Ciattarelli, the Republican challenger.

But the Tuesday results on tax-related ballot measures across the country offer a glimpse of voters’ mindsets as well.

Washington has no state-level income tax, but it does have a capital gains tax that’s slated to take effect next year following Gov. Jay Inslee’s enactment in May. Inslee is the Democratic governor of a perennial “blue state” backing the Democratic nominee during presidential elections.

The constitutionality of the yearly 7% tax on long-term gains exceeding $250,000 is being fought in court. While litigation continues, voters in the state weighed in Tuesday on whether the tax should be repealed or maintained in the non-binding Advisory Vote 37.

Nearly 63% voted for repeal and 37% voted to maintain, according to result from Washington Secretary of State office posted Tuesday night.

“If Washington state voters are overwhelmingly rejecting a capital gains income tax only on high earners, that is a message to policymakers across the country that voters aren’t interested in using the tax code as a cudgel. … There’s a cautionary note here,” said Jared Walczak, vice president of state projects at the Tax Foundation, a right-leaning think tank.

Others say the results do not carry much weight. “It doesn’t have any repercussion. It becomes a talking point really for the right,” said Summer Stinson, executive director of Washington’s left-leaning Economic Opportunity Institute, who supports the state’s capital gains tax.

The question appeared down on the ballot and there wasn’t any campaigning on the topic, Stinson said. So if voters came across the ballot question, living in a state without an income tax, it might have been a quick ‘no’ decision for many, she said.

Polling and surveys through the years show many Americans feel rich households and businesses have an edge in the tax code and should pay more — and Stinson said that’s where tax attitudes are really on display.

But there can be a “disconnect,” Walczak said. “Sometimes when confronted with actual proposals, they seem to blanch at them.”

Proposed capital-gains rate hikes were cut out of the latest version of the social safety net plan that’s kicking around on Capitol Hill. President Joe Biden had originally proposed making the capital gains rate 39.6% for millionaires, which would have matched an elevated top income tax rate.

Colorado voters rejected higher taxes on cannabis with Proposition 119

In Colorado, where recreational adult marijuana use is legal, retail cannabis sales are currently taxed at 15%, according to the Tax Foundation.

Proposition 119 called for a 5% increase that would have taken the tax to 20% by 2024. That tax revenue and other income sources would have created a program to subsidize out-of-school tutoring and enrichment. The programs would have helped narrow education gaps between low-income students and well-off households able to pay for extra educational support, some supporters said.

But the ballot measure would have poured money into a newly-created program that would siphon off money and resources for public schools, according to critics, including an organization called No on Prop 119.

More than 54% of voters in the state voted against the measure, according to the Colorado Secretary of State office.

Compared to the Washington vote, Walczak didn’t see a broader tale in the Colorado vote. Voters might be wary of tying programs to money generated from specific industries, like cannabis, where revenues might unreliably rise or fall.

Maclyn Clouse, a finance professor at the University of Denver, said the results were more about Colorado and cannabis-specific questions than national tax policies.

It wasn’t clear how the program would have worked and it might have leaned too heavily on cannabis tax revenue, Clouse said. “It seems like people think the marijuana tax is like a free bank where you can always increase the marijuana tax and get money from there and presumably people would be OK with that. … You can only go so far with that,” he said.

“Though our support across the state was broad, Prop 119 was voted down,” Yes on Prop 119, an organization supporting the measure, said on Twitter
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“We vow not to give up on Colorado kids in our efforts to close the opportunity gap, especially after pandemic-fueled learning loss.”

In other money and tax-related ballot matters:

• Nearly 57% of voters in New Jersey rejected the chance to expand gambling to cover college teams and college sporting events taking place in the state.

Texas voters overwhelmingly voted for rules enabling property tax breaks in the special circumstances of surviving spouses of disabled individuals or armed forces members killed in the line of duty.

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