For over 50 years, Bloomberg BNA’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...
By Che Odom
Nov. 16 — A growing number of states may cut taxes on corporations and look to soft drinks and legalized marijuana to make up some of the difference, as a result of the Nov. 8 elections.
Republicans will be taking over three gubernatorial seats formerly held by Democrats: Eric Greitens in Missouri, Chris Sununu in New Hampshire and Phil Scott in Vermont. In addition, the GOP will take control of both houses of state legislatures in Kentucky, Iowa, Missouri and New Hampshire.
Democrats will take control of the legislatures in Nevada and New Mexico, both of which have Republican governors.
Given those and other GOP gains, the trend toward lower corporate taxes among states is likely to continue, Jared Walczak, a Tax Foundation policy analyst, told Bloomberg BNA Nov. 15.
This will happen “whether or not we see tax reform at the federal level, and the results of state gubernatorial and legislative elections probably increase the likelihood that a number of states will pursue tax reform in 2017,” he said.
Even voters seem to approve of lower taxes on companies.
Louisiana voters rejected a constitutional amendment that would have abolished a tax break allowing businesses to deduct the federal income taxes they pay from their state taxes.
In Oregon, voters opted against transforming the state’s corporate tax base from one determined mostly by net income to one determined mostly by Oregon sales or gross receipts of a relatively small group of large corporations. The change would have put more money into state coffers.
During the past eight years, 15 states have cut corporate income taxes and 18 have reduced individual income taxes, Walczak said.
Meanwhile, voters in California, Maine, Massachusetts and Nevada opted to legalize and tax the sale of marijuana. That raises to eight the number of states where, come January, recreational use won’t be a crime. Washington, D.C., also allows legal use of the drug. Twenty-eight states and the District of Columbia allow medical use of marijuana.
Those jurisdictions may rake in tens of millions, “even hundreds of millions” of dollars, in tax revenue as the industry develops, Walczak said.
“States which just adopted marijuana taxes on Election Day may not see an immediate revenue boon, as they will still need to establish frameworks for the cultivation and sale of marijuana, and the industry will take some time to establish itself in these states,” he said. “Given time, however, marijuana taxes are likely to become a meaningful revenue stream.”
Industry figures tell Wall Street they see more states legalizing marijuana, but are cautious about how the federal government will respond after President-elect Donald Trump takes office.
Derek Peterson, president and chief executive of California-based Terra Tech Corp., said in a Nov. 10 Securities and Exchange Commission filing that he believed Trump would allow the industry “to continue to grow at the rated average.”
“I don’t know that we’re going to see any huge federal overhaul on the short run, but I do believe that we’re going to continue to allow states to make these types of decisions,” he said.
Others in the industry, however, tell Bloomberg News they worry that the Department of Justice under Trump may interfere with state efforts, given that many of those close to Trump, including former New York City Mayor Rudolph Giuliani, are against legalization.
Media reports suggest Trump is considering Giuliani for attorney general or secretary of state.
Also on Nov. 8, Boulder, Colo., Cook County, Ill., and three California cities—Albany, Oakland and San Francisco—joined Berkeley, Calif., and Philadelphia in passing taxes on beverages sweetened with sugar.
“Advocates of soda taxes were heartened by their successes on Election Day and appear eager to expand the playing field in the coming months and years,” Walczak said.
Though advocates had hoped to get the measure on the ballots of about a dozen states, “soda taxes are poised to be the next big push in municipal taxation,” he said.
“Whether soda taxes, which disproportionately fall on lower- and middle-income individuals, will enjoy significant popular support in a broader range of cities remains to be seen, but it’s likely that we’ll find out soon enough,” he added.
California ballot initiatives were supported, in part, by $18.8 million from former New York Mayor Michael Bloomberg, who is the founder and majority owner of Bloomberg BNA parent Bloomberg LP.
To contact the reporter on this story: Che Odom at COdom@bna.com
To contact the editor responsible for this story: Ryan C. Tuck at firstname.lastname@example.org
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)