State Votes Test Attitudes Toward Tax Hikes

Tax accountants and others looking for clues on how the anti-tax Tea Party movement will affect this fall’s national elections received mixed signals from voters in a number of recent ballot initiatives.

Opponents of big government spending programs made their presence felt in Toledo, Ohio, where officials were seeking a 33 percent hike in the city’s income tax rate to expand the local school budget. Despite a heavily financed campaign by the teachers union in support of the tax hike, Toledo voters shot down the plan by nearly a two-to-one margin.

Tea partiers have had less success elsewhere, however. After rejecting tax hike ballot initiatives in 2008 and 2009, voters in Oregon narrowly approved a measure earlier this year to address the state’s $727 million budget shortfall by raising the state income tax rates on corporations and on households with taxable family income above $250,000.

Similarly, a plan to boost the boost the Grand Rapids, Mich., city income tax by 12.4 percent squeaked through by a razor thin 204-vote margin.

Despite these narrow setbacks at the polls, the clout of the anti-tax movement is being felt indirectly in a number of other financially stressed cities and states where officials aren’t even talking about property or income tax increase increases to address their budget crises.

Instead, they’re targeting an increasingly marginalized subset of taxpayers: smokers.

Lawmakers in Washington have moved to close their state’s $2.8 billion budget gap by boosting the tax on tobacco products to $3.03 per pack — the second highest in the nation. Pennsylvania Governor Ed Rendell is talking up new taxes on cigars and smokeless tobacco to address that state’s budget problems, and legislation on the move in the Illinois General Assembly would increase that state’s cigarette tax by $1 a pack.

The rudest awakening for the tobacco industry came in South Carolina — home to the nation’s lowest cigarette tax. Despite opposition from the state’s governor, both houses of the legislature voted overwhelmingly to add 50 cents to the state’s 7-cent per pack cigarette tax.

Meanwhile, in the District of Columbia, where the city council adopted steep tobacco tax increases last year, officials are now looking to squeeze more tax revenue from service providers who cater to Washington’s more affluent crowd. Among those in the cross-hairs: Washington, D.C. health club operators, pet groomers and yoga instructors.