State taxes on the ballot, counties at risk

States are constantly tinkering with their tax policies, looking for the sweet spot between voter happiness and balanced budgets while county governments are often stuck in the middle.    

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“Taxation policy and service delivery decisions are being moved, state by state, from the courthouse to the statehouse,” said Matt Chase, CEO of the National Association of Counties.  “The accountability lands on us. The authority to meet it increasingly doesn’t.”

The court system plays a key role in local tax policy by ruling on the legal standings of exemptions, caps, freezes, surpluses and ballot initiatives that are often enacted by states. 

NACo is concerned about state governments cutting a key revenue source for counties. 

“We’re tracking governors and state legislatures who are pushing a wave of tax relief measures,” said NACo.  

“Session after session, coast to coast, there’s a growing squeeze on the primary revenue source for most counties: property taxes.”    

Property taxes provide a reliable source of revenue for debt service while supporting local first responders and school systems. 

NACo posits that calls for property tax reductions may be tied to politics as opposed to taxpayer relief. 

“Are these state measures really built around the daily struggles of residents? Or are they about something else — energizing turnout in razor-thin races, answering to special interests or a mixture?” 

Several measures are raising concerns including Florida which is considering raising the cap on homestead exemptions for owner-occupied houses.

If the amendment passes with 60% of the vote, the cap will rise to $150,000 from the current $50,000. In 2028 it would rise to $250,000. 

Republican Gov. Ron Desantis has campaigned on eliminating property tax in the state and making up the difference by raising state sales tax, corporate income tax, and taxes on second homes. 

NACo quotes numbers from Florida’s Revenue Estimating Conference that if the measure passes recurring local revenue losses will be about $11.9 billion once the cap is fully phased in.  

Indiana has already passed a similar cap.

Iowa capped local government revenue growth at 2% a year, with exceptions for schools, and county supplemental levies while limiting tax increment financing districts to 20 years. 

Texas Republican Gov. Greg Abbot is pushing a plan to end school property taxes on homesteads, cap local spending growth at 3.5%, require two-thirds voter approval for local tax increases and allow citizen-petitioned rollback elections.

Lt. Gov. Dan Patrick prefers another $40,000 exemption.

North Carolina is considering an amendment that would set a property tax levy limitation for local governments including counties, cities, towns, and special districts.  

A first of its kind wealth tax is on the ballot in California that would levy a 5% tax on the state’s billionaires who are deemed residents as of January 1, 2026, based on their wealth as of December 31, 2026, regardless of whether they still reside in the state at that time. 

California is also voting on the state imposing new taxes on retirement holdings, individually owned assets, and other personal savings while prohibiting retroactive enactment of new taxes. 

Colorado voters will decide if the state will abandon its current flat income tax system and adopt a new graduated-rate individual and corporate income tax with rates ranging from 3.7% to 8.4%.

New revenues from these tax increases would be dedicated to education, health care, and childcare programs.