State budgets on the ballot

Election day will determine the balance of power in the 120^th Congress but will also play a major role in what happens with state budgets next year. 

Processing Content

“There are 145 ballot measures in 36 states in the upcoming general election,” according to the National Association of State Budget Officers. 

“Since this is a midterm election year the numbers are significantly higher than the 24 measures from last year.” 

The National Council of State Legislators notes that, “this year’s most common ballot measure topics include taxes, bonds, elections, and education.” 

“Overall, there are many more legislatively referred measures on this year’s ballot than citizen-initiated questions.” 

NASBO is tracking thirteen states with tax measures on the ballot including California, which is trying to pass Proposition 3, a wealth tax that was enacted in 2012 and is set to expire in 2031.

The tax is levied on incomes over $360,000 with the tax revenue going to schools and healthcare.  

California is also voting on a 5% wealth tax on billionaires, a $25 billion homebuyer’s bond and an $11.5 billion affordable housing bond. 

By contrast, Washington state is considering abandoning its 9.9% wealth tax on millionaires, which is expected to bring in at least $3 billion annually. The bill was passed in March and doesn’t take effect until 2028. 

The state currently doesn’t have a personal income tax but is seeking relief from budget pressures coming from the effects of the One Big Beautiful Bill Act.    

Colorado is considering abandoning its flat tax structure and capping corporate and individual tax rates. 

A flat tax uses one rate for all income classes and enjoyed a renaissance between 2021 and 2025 as eight states adopted the system. 

Colorado is considered a pioneer in the movement by putting their system in place in 1987.  

Proponents of ending the 4.4% rate are pitching a six-bracket graduated system ranging from 3.7% up to 8.4% that they say will generate an estimated $2 billion annually.   

North Carolina, which is a flat tax state, is weighing lowering the maximum allowable state income tax rate from 7% to 3.5%

The state’s personal income tax rate is already scheduled to drop to 3.49% but if the measure passes it restricts future legislatures from raising income tax rates above 3.5%.  

The amounts that states are required to keep in reserves are going on the ballot in California and Florida.  

California is voting on increasing the cap on it Budget Stabilization Account from 10% to 20%. Florida is looking at going from 10% to 25% of net general revenue.  

Florida is also generating headlines around Amendment 3 which would raise primary residence homestead exemption for non-school property taxes from the current $50,000 up to $150,000 in 2027, and to $250,000 in 2028. 

The Florida legislature has estimated the bill could cut local government revenues by $4.6 billion in the first year and by $8.4 billion in the second year. 

Florida’s Governor Ron DeSantis would like to see property tax in the state eventually eliminated completely.  

Arizona is voting on prohibiting the state from imposing a tax on vehicle miles traveled, a fee-based system that is often proposed as a solution to returning the federal highway trust fund to solvency. 

Over 700 other bond measures will also be put to a vote on Tuesday with California leading the way in dollar amounts.