On a less shocking note about the 2016 Election, several states have enacted new state tax laws. In recent years, there has been a trend towards direct democracy when it comes to state taxes. Instead of elected officials making new tax laws, states have allowed voters to choose whether to increase taxes on their ballots.
It appears that voters in several states have elected to increase taxes during this recent election. Most of these new state tax laws are targeted at specific products; such as cigarettes, legalized marijuana, and soda. Some states have also increased income taxes on high wage earners. Below is a list of the recent state tax increases.
- Tax on Legalized Marijuana
Not only have voters in California, Massachusetts, Nevada, and Maine decided to legalize recreational marijuana, they have also decided to tax marijuana at increased rates.
Under California’s Proposition 64, recreational marijuana consumers will pay an additional 15 percent sales tax on top of the California sales tax rate of 6.25 percent. Recreational marijuana will also be subject to local sales tax rates, ranging from 1.25 percent to 3.75 percent. Thus, recreational marijuana consumers in California may be paying up to 25 percent in taxes for each purchase.
Massachusetts and Maine will tax marijuana at lower rates than California and Nevada, but taxes in these states will still be high (no pun intended). Maine will impose a 10 percent sales tax and Massachusetts will impose an excise tax of 3.75 percent. Also, local governments in Massachusetts may impose an additional 2 percent on top of the statewide 6.25 percent sales tax.
The new recreational marijuana taxes in Nevada, Massachusetts and Maine will likely raise millions in revenue. California estimates that tax revenue will be about $1 billion. Nevada plans to use the revenue for school funding. Maine will be depositing the taxes into the general fund and the Local Government Fund. California plans to use the funds for several programs, including drug research, youth programs, and regulating impaired driving. Massachusetts will use the funds for regulation of the new law.
- Tax on Sugar-Sweetened Beverages
Boulder, Colorado and three cities in California; San Francisco, Oakland, and Albany; have imposed a tax sugar-sweetened beverages, such as soda. Boulder will be imposing an excise tax of 2 cents per ounce on distributors of sodas. Albany, San Francisco, and Oakland will impose a 1 cent per ounce excise tax.
Taxes on sugar-sweetened beverages have been somewhat controversial. Soda and other sugary drinks are a leading cause of obesity. Proponents of the tax argue that it will help stem obesity. Critics of the tax argue that it imposes a burden of poorer families, who are already struggling financially in this economy.
Berkeley, California enacted a similar tax in 2014, and has raised $1.5 million in revenue. The four cities that recently enacted this legislation are expecting a similar result. Further, Berkeley has observed a 21 percent decrease in consumption of sugary beverages.
- Tax on Cigarettes
California’s voters have elected to increase taxes on cigarettes from 87 cents to 2.87 cents per pack under Proposition 56. The new law is also the first in the country to impose a tax on e-cigarettes containing nicotine. The tax is expected to raise $1.4 billion a year in revenue and funds will be used for health care, smoking prevention programs and cancer research.
- Income Tax for High Wages Earners
Voters in California and Maine passed state income tax laws during this election. California enacted a 13.3 percent income tax rate on the wealthiest residents in 2012. This election, California’s voters passed Proposition 55, that extends the 13.3 percent rate for individuals earning over $263,000 and joint-filers earning over $526,000. This is the highest state income tax rate in the country and should raise $4 to $9 billion in revenue for schools and health care funding.
Maine voters also elected to increase income taxes on its highest wage earners. Maine’s state income tax rate for individuals earning over $200,000 will increase from 7.15 percent to 10.15 percent. The 3 percent increase is projected to raise $142 million in revenue and will be used to fund public education.
Authored by Robin Sheehan, LegalMatch Legal Writer