Last night’s midterms had a clear winner when it comes to party politics. But, on the tax and fiscal front, the results were far more mixed. We’re tracking the results of some of the biggest ballot measures in this realm, and what they mean for taxpayers.
California
Proposition 3 PASSES.
What it would do: In 2012, Californians approved temporary income tax increases on top earners. These temporary increases were extended in 2016 and are currently set to expire in 2031.
Taxpayer impact: California will continue to impose the highest top individual income tax rates in the nation, reaching as high as 14.6%. These high rates have made California uniquely uncompetitive and caused the state to lose taxpayers to outmigration at the fastest rate in the country.
Proposition 40 has not been called. “NO” is currently leading.
What it would do: Proposition 40, the “Billionaire Wealth Tax,” would impose an initially one-time, unprecedented tax on the total wealth of individuals with a net worth exceeding $1 billion.
Taxpayer impact: California has already lost a large chunk of its tax base, amounting to hundreds of billions of dollars, to billionaires leaving the state ahead of the tax. Should Proposition 40 become law, the tax will face legal challenges on a number of issues.
Colorado
Amendment 87 has not been called, “YES” is currently leading.
What it would do: Amendment 87 would replace the state’s current 4.4% flat income tax rate with a graduated income tax with rates as high as 8.4%.
Taxpayer impact: Should Amendment 87 pass, Colorado would go from having a competitive income tax rate to easily the highest in the region. A conflicting measure, Proposition 136, would have invalidated Amendment 87 had it passed with more votes, but is currently not on track to do so.
Proposition NN PASSES.
What it would do: Proposition NN would raise TABOR spending caps by over 25%, increasing the amount the state can collect and spend without triggering refunds to taxpayers.
Taxpayer impact: The passage of Proposition NN represents another nail in the coffin for TABOR, further weakening the state’s pioneering protections for taxpayers against overspending and runaway tax increases. TABOR refunds will be unlikely for the foreseeable future.
Florida
Amendment 3 PASSES.
What it would do: Amendment 3 would expand the state homestead exemption over the next two years to $250,000. Additionally, the amendment lowers the non-homestead property assessment cap from 10% to 5% annually.
Taxpayer impact: Current homeowners in Florida will see lower property taxes in the coming years. All other property classes will likely see their property taxes increased to compensate, including commercial, industrial, and rental properties. A five-year phase-in for new residents means that those moving to Florida will be facing a higher tax burden for the same local services current residents receive. Local governments will look for other ways to make up for tens of millions of dollars in lost revenue, including raising local-option sales taxes.
Iowa
Amendment 1 PASSES.
What it would do: Would require a two-thirds majority in both houses of the state legislature to increase the individual or corporate income tax rate.
Taxpayer impact: Amendment 1 establishes a strong new barrier against future tax increases in a state that has dropped its income tax from 8.53% down to a 3.8% flat rate in the past few years.
North Carolina
Property Tax Levy Limit Amendment PASSES.
What it would do: Requires state lawmakers to pass legislation limiting the amount local property tax revenue can increase each year.
Taxpayer impact: The passage of the amendment means that North Carolina lawmakers will have to pass laws addressing rising property taxes in the coming legislative session. Some previously introduced pieces of legislation contain levy limits and could be passed in the next two months to satisfy the amendment’s requirement.
Reduce Income Tax Rate Cap from 7% to 3.5% Amendment PASSES.
What it would do: As the name of the ballot measure suggests, it would lower the cap on the income tax rate in the state constitution from 7% to 3.5%.
Taxpayer impact: This measure represents a tax cut as well as a cap, as the current top income tax rate is 3.99%. North Carolina has made tax competitiveness a priority in recent years, and received a strong endorsement from voters on these efforts.
Oklahoma
Oklahoma State Question 847 FAILS.
What it would do: This ballot measure would have lowered the growth caps on assessment limits for all properties.
Taxpayer impact: The failure of Question 847 leaves the current annual growth limits of 3% for homesteads and 5% for all other properties in place. Assessment limits typically fail to directly address rising property taxes, so lawmakers in Oklahoma will have to find legislative paths to deliver relief to taxpayers.
Tennessee
Amendment 2 PASSES.
What it would do: Amendment 2 prohibits the state from imposing a statewide property tax.
Taxpayer impact: While the amendment does not lower existing property taxes, it does prevent the state government from putting in place taxes on real or personal property in the future. The state has not imposed such a tax since 1949, and Tennessee is one of 14 states that do not currently impose any statewide property tax.
Washington
Initiative 645 FAILS.
What it would do: The amendment would have overturned the new state income tax that is set to go into effect in 2028.
Taxpayer impact: The failure of Initiative 645 means that taxpayers will need to turn to the courts for relief against the imposition of a new state income tax. State courts have historically interpreted the state constitution as prohibiting income taxes in Washington.
Wyoming
Initiative 1 FAILS.
What it would do: The only statewide measure in Wyoming would have created an exemption on 50% of a primary residence’s value.
Taxpayer impact: Though Wyoming is among the 10 states with the lowest property taxes in the country, taxpayers still seek relief from rising bills. With the failure of Initiative 1, state lawmakers will be looking for other solutions.