State tax proposals on the ballot this past election cycle represent a wide range of policy goals and challenges, each with the potential to significantly influence individuals and businesses. Although federal tax policies often dominate national headlines, state and local ballot measures can have a direct impact on a wide range of issues, from property tax rates to the funding of essential public services such as education, infrastructure and public safety.
Several states considered adjusting property taxes to address inflation, while others sought to generate revenue by taxing luxury items or high-income earners. Meanwhile, some states proposed exempting essentials like diapers and groceries from sales tax to ease financial pressures on families.
Arizona
In Arizona, Proposition 312 was passed, a measure that will redefine the relationship between property owners and local government enforcement practices. The proposition allows property owners to apply for a property tax refund for expenses incurred due to local authorities not adequately enforcing laws against activities such as illegal camping, loitering and public disturbances.
This proposition emerged amid growing debates about homelessness and urban management, aiming to hold local governments accountable for maintaining public order. Now that it has passed, it could prompt cities and towns to reassess their enforcement strategies and resource allocation.
California
California's tax landscape has been a hotbed of activity, particularly with the proposed Taxpayer Protection and Government Accountability Act. Although this measure was removed from the ballot after a court ruling, it highlights significant tensions regarding tax policy in the state.
The initiative aimed to make it more challenging to impose new taxes or fees by requiring voter approval, reflecting ongoing concerns about government accountability and fiscal responsibility. The court's decision underscores the complexities involved in amending state tax laws, as well as the balance of power between voters, the legislature and the judiciary.
Colorado
In Colorado, voters were faced with decisions on Propositions JJ and KK, both of which aim to reshape state revenue allocation:
- Proposition JJ was passed and will channel excess sports betting tax revenue into water conservation projects, a move that aligns with increasing awareness of environmental sustainability. As sports betting revenues soar, the proposition will set a precedent for using these funds to address pressing ecological concerns.
- Proposition KK was passed and will bring a 6.5% excise tax on firearms and ammunition to fund public safety, mental health services and school security. By targeting specific industries, these measures reflect Colorado's efforts to address societal challenges through targeted taxation, potentially impacting stakeholders in the betting and firearms sectors.
Florida
Amendment 5 in Florida was passed and addresses the state's approach to property tax exemptions, proposing an annual inflation adjustment for a portion of the homestead exemption. Before Amendment 5, this exemption allowed homeowners to reduce their assessed property value, thereby lowering their tax liability.
By linking the exemption to inflation, the amendment will safeguard that homeowners' tax relief keeps pace with rising property values and living costs. This adjustment will also provide significant financial benefits to property owners, particularly in a real estate market characterized by rapid appreciation.
Georgia
Georgia's ballot included three distinct tax-related measures that were all passed, each with far-reaching implications:
- Amendment 1 will bring a statewide local homestead exemption tied to inflation, offering property tax relief while allowing local governments to opt out. This will lead to a patchwork of tax policies across the state, affecting homeowners differently depending on their locality.
- Amendment 2 will establish a Georgia Tax Court to handle tax disputes, moving these cases from an administrative tribunal to the judiciary. This change could enhance the transparency and fairness of tax adjudications.
- Referendum A will increase the personal property tax exemption, primarily benefiting sectors like agriculture and manufacturing.
Collectively, these measures represent a significant shift in Georgia's tax policy landscape, with potential impacts on property owners, businesses and local government funding.
Illinois
In Illinois, voters considered a proposal to implement a 3% surtax on income exceeding $1 million. This "millionaire's tax" was presented as a non-binding advisory question designed to gauge public sentiment on shifting the tax burden toward the state's wealthiest residents.
Proponents argue that the surtax could generate significant revenue, which could be used to reduce property taxes, fund education and address other fiscal needs. However, opponents warn that such a tax could drive high-income individuals and businesses out of the state, potentially reducing economic competitiveness.
This non-binding proposal was supported by more than half of voters in the November 2024 election, and now, the “millionaire’s tax” might be a constitutional question in the next statewide ballot measure in 2026.
Louisiana
In Louisiana, Amendment 4, which proposed changes to the administration of property tax sales, was passed on December 7, 2024. The amendment was designed to help streamline tax sales procedures by removing certain constitutional provisions and allowing the legislature to establish rules for tax lien sales. Additionally, it permits tax payment postponements during emergencies declared by the governor, providing flexibility during crises.
Nevada
Nevada voters passed Question 5, which will exempt diapers from the state sales tax. This measure addresses the financial burden on families, particularly those with young children or elderly dependents. Before Question 5, Nevada's sales tax rate was 6.85%, with additional local taxes possible. By eliminating the tax on both adult and child diapers, the state will join 19 others and D.C. in providing this exemption.
The proposal reflects broader efforts to make essential goods more affordable and alleviate cost-of-living pressures.
North Dakota
In North Dakota, Initiative Measure 4 was rejected by a majority of voters. Measure 4 proposed a significant shift in the state's tax system by prohibiting local governments from levying taxes on the assessed value of real or personal property, except for bonded indebtedness payments. This measure aimed to eliminate property taxes based on assessments, requiring the state government to replace lost revenue to local jurisdictions.
Oregon
Oregon's Measure 118 failed by a substantial margin. It sought to increase the minimum corporate tax on businesses with in-state sales of $25 million or more, directing additional revenue to residents as tax rebates. The measure would have redistributed corporate wealth directly to individuals, offering financial relief to those who met residency requirements. This initiative reflects efforts to balance corporate contributions with public welfare.
South Dakota
Initiated Measure 28 in South Dakota was rejected overall by voters, and it proposed eliminating the state sales tax on items for human consumption, including groceries. The current state sales tax is 4.2%, with potential additional municipal taxes. By removing this tax, the measure sought to reduce the financial burden on residents, particularly benefiting low-income households.
Washington
Washington voters faced decisions on two significant initiatives that would have reshaped the state's fiscal landscape. Both initiatives did not receive a majority vote. Initiative 2109 sought to repeal the state's 7% capital gains tax, which was implemented in 2022. This tax applied to long-term capital gains exceeding $250,000 and has been a subject of controversy. Opponents argued that it disproportionately affects investors and could deter business growth and economic development.
Additionally, Initiative 2117 proposed repealing key sections of the Climate Commitment Act, a 2021 law designed to reduce greenhouse gas emissions through a cap-and-invest program. This program mandates that businesses with significant emissions purchase allowances to cover their greenhouse gas output, with the goal of incentivizing reductions.
Wyoming
Wyoming passed a constitutional amendment to create a new tax classification for owner-occupied residential properties. Before this amendment, all property types, including commercial and residential, are assessed uniformly at full value.
This change will allow the legislature to set different tax rates for owner-occupied homes, potentially offering tax relief to homeowners while maintaining higher rates for other property classes. This amendment will address concerns about property tax burdens on residents, particularly in the face of rising housing costs.
Let Us Be Your Guide
Navigating the evolving landscape of state tax laws can be daunting for individuals and businesses alike. With each state implementing unique tax measures that can significantly impact financial planning and obligations, staying informed and compliant is crucial. Cherry Bekaert's Tax Services team is here to simplify this complex process for you. Our team of professionals is well-versed in state-specific tax regulations and is dedicated to helping you understand how these changes affect your personal or business finances.
