While the eyes of the world will be on who wins the White House next Tuesday, there is plenty of other action going on across the US.
Every year, states across the country vote to elect local representatives and to change local laws, on issues ranging from same sex marriage to legalising psychedelic drugs.
Unsurprisingly, many of those will concern the money in people’s pockets. Voters in 12 states next Tuesday will be asked to vote on 19 measures which could affect the taxes they pay on their incomes, properties or purchases.
With the question of how to pay for the coronavirus crisis one that is at the front and centre of the political debate on both sides of the Atlantic, This is Money looks at three states asking voters to put their money where their mouth is.
Donald Trump and Joe Biden are competing for the White House next Tuesday, but further down the ballot states are asking voters’ views on a whole range of topics
Could Illinois abolish its flat tax?
Illinois, the Midwestern state home to the Windy City of Chicago, is asking voters to abolish part of its 50-year-old constitution which currently requires it to tax all citizens at the same rate.
It is worth noting at this point that Americans pay both federal taxes to the US Government in Washington DC and then a variety of state taxes, in a similar, if much more complicated, way to how people in the UK pay tax to HMRC and then council tax to their local authority.
US federal income tax rates, like ours, are progressive, in that they increase according to the amount people earn, but the way states run their affairs is up to them.
Many, most notably Florida and Texas, don’t tax people’s incomes at all, while Illinois is currently one of nine states which levy a flat tax.
Illinois is one of 9 US states with a flat income tax, but is asking voters whether they wish to change to a system which would charge people more if they have higher incomes
Taxpayers are charged 4.95 per cent of their net income regardless of their earnings, the ninth-lowest top tax rate in the US among those states which do charge income tax, although those in the state do pay comparatively high taxes on property.
It is one of three Midwestern states, along with Indiana and Michigan, which taxes its citizens this way.
And while the vote is only on repealing the language from the state’s own constitution that requires a flat tax rate, if voters approve it, from January Illinois will instead replace it with six tax bands of between 4.75 per cent, for those earning up to $10,000 or £7,707, to 7.99 per cent for those earning more than $750,000, or around £578,000.
|Earnings||Old marginal tax rate||Potential new marginal tax rate|
|$0 – $10,000||4.95%||4.75%|
|$10,001 – $100,000||4.95%||4.90%|
|$100,001 – $250,000||4.95%||4.95%|
|$250,001 – $350,000||4.95%||7.75%|
|$350,001 – $750,000||4.95%||7.85%|
The only people who would pay more under the proposals would be those earning more than a quarter of a million dollars, meaning around 175,000 people will foot the bill for the supposed $3billion tax rise.
Illinois was already in massive financial trouble before the coronavirus, facing a massive hole in its pension fund.
But the pandemic has made things much worse. It faces a budget shortfall of around $6.2billion, or £4.78billion, this year and saw its income tax take fall by 23 per cent annually between April and June.
However, arguments in favour of the proposal have mostly centred on making the tax system fairer, rather than as a way to raise taxes on the rich to cover the cost of the coronavirus.
Even though Illinois is near certain to vote for Joe Biden on Tuesday, driven by heavily Democratic Chicago, the campaign has become one of the most expensive state ballot initiatives in history.
Illinois governor JB Pritzker (above) has poured $56.5m (or £43.5m) of his own money into the campaign to change Illinois’ tax system, while opposition to the measure has been largely bankrolled by hedge fund boss Ken Griffin
Supporters and opponents have together raised more than $121million, or £93million as of the end of last month.
It has largely been a fight between two billionaires, with the money in support of the measure largely coming from Illinois governor JB Pritzker, part of the family who own the Hyatt hotel chain.
On the other side, US hedge fund manager Ken Griffin, the 120th wealthiest person on Forbes Magazine’s rich list, has poured in $53.75million to try and stop the measure from passing, while another $750,000 has come from Pritzker’s own cousin Jennifer.
In a poll in February, before the pandemic, 65 per cent of 1,000 people surveyed said they favoured a tax system where those on lower incomes paid less and those on higher incomes more.
Could Arizona slap an extra tax on the rich?
Arizona has voted Republican in every US presidential election since Bill Clinton was re-elected in 1996, but has recently emerged as a state increasingly up for grabs for the Democrats.
Further down the ballot paper, the south western state is asking citizens to decide whether it should enact an additional 3.5 per cent tax on those earning more than a quarter of a million dollars to raise money for schools.
Asking for ‘those with the broadest shoulders to bear the heaviest burden’ is a common phrase when politicians argue the rich should pay more tax, and Arizona has followed a similar path.
|Income||Current marginal tax rate|
|$0 – $26,500||2.59%|
|$26,501 – $53,000||3.34%|
|$53,001 – $159,000||4.17%|
Although unlike Illinois, Arizona is a state with a progressive tax system and the richest do pay a higher rate of tax already, with four brackets charging between 2.59 per cent and 4.5 per cent, with earners paying that top rate once they hit a $159,000 threshold.
This top rate is currently the fifth-lowest in the US, having been cut from 4.54 per cent for this tax year.
The state took in $1.13billion from income taxes between April and June this year, and if the vote is passed then around 90,000 people in the state would see their tax rate rise to 8 per cent.
The measure is supported by senator Bernie Sanders, who twice tried to run for president, among others, with supporters raising $21million and opponents of the tax rise $5.7million, making the race about a sixth as expensive as Illinois’.
One of the latest polls carried out in September found two-third of the 420 people surveyed were in favour and 25 per cent opposed it.
Former presidential candidate senator Bernie Sanders is one of those backing a 3.5% hike in the rate of tax paid by those in Arizona earning more than $250,000 (£192,800)
Could Colorado put £28.50 in everyone’s pocket?
If Illinois and Arizona plan to raise taxes for at least some of their citizens, those in Colorado are set to vote on a measure which would cut taxes for everyone in the state.
Like Illinois, Colorado is one of the nine states with a flat income tax, having had one since 1987.
It currently sits at 4.63 per cent, a fraction higher than Arizona’s top rate of tax, having been cut from 4.75 per cent in 2000.
The state in the American west, probably best known for the ski resort of Aspen in the Rocky Mountains, also has a particular quirk in that since 1992 any tax rises proposed by elected officials must be approved by voters.
|Taxable income||Tax owed at current rate of 4.63%||Tax owed at proposed rate of 4.5%||Decrease|
As well as codifying the state’s flat tax, its ‘taxpayer bill of rights’, or TABOR, also caps how much state and local governments actually get to keep of the tax take.
Anything above that is supposed to be reimbursed to citizens, although this ‘TABOR refund’ hasn’t been received by anyone in five years and 51 of the 64 counties in the state have voted to lift this cap.
But the ballot measure, one of four tax-related initiatives voters will make a choice on Tuesday, could still serve to put a sum back in everyone’s pocket.
If it passes, the income tax rate will be cut across the board from 4.63 per cent to 4.55 per cent, which would take it to just above Arizona’s.
This would amount to a tax cut of $37, or £28.50, per taxpayer on average, according to the Colorado ‘blue book’, an impartial booklet sent out to voters every year to explain the various measures they are being asked to vote on.
Colorado has had a flat rate of income tax since 1987, and since 1992 has required politicians to get approval from voters if they ever wish to raise taxes
Supporters of the cut, who have spent $1.4million during the campaign, say it leaves more money in the pockets of taxpayers at a time when people are struggling to make ends meet, while critics say it will lead to a loss of revenue the state cannot afford and largely benefit those earning more than half a million dollars.
The blue book estimates it will cost the state $357million in revenue over the next two year.
The latest polling this month of 1,000 people, perhaps unsurprisingly, found the majority of voters, 51 per cent supported handing themselves money by voting in favour of the cut, while 35 per cent opposed it.