Midterm elections could lead to higher taxes in some states: What voters need to know

As Americans head to the polls for the crucial midterm elections, all eyes are on whether Republicans or Democrats will win the battle for Congress.

But residents of some states will have to decide whether to enact major tax policy changes, including raising rates paid by the wealthiest Americans.

Here’s a look at some of the biggest tax changes on this year’s ballot.

California

Wealthy Americans living in California could see their already high taxes soar even higher if voters on Tuesday approve a controversial bill to tax the wealthy.

The measure, Proposition 30, Raise taxes by 1.75% on those earning $2 million per year, generating up to $5 billion in new revenue annually. Most of that money would go to programs that help people buy electric cars and install charging stations. A smaller portion would go to wildfire prevention efforts.

Proponents of the measure have said it could help facilitate the transfer of clean vehicles that Gov. Gavin Newsom, a Democrat, has pushed so vehemently as California, the largest market for new cars in the country, it tries to move away from the vehicles that consume a lot of gasoline and that are one of the main culprits of climate change. Newsom does not support the tax.

If the tax passes, wealthy Californians would see the top marginal rate on their earned income rise to 16.15%. California already has the highest income tax in the country, with a top rate of 13.3% for those earning more than $1 million.

On top of that, the proposal does not include an exception for married couples, meaning the additional 1.75% tax would be $2 million for single and joint filers, creating the so-called “marriage penalty,” according to to the Tax Foundation, a nonprofit group that advocates for lower taxes.

Colorado

In Colorado, Proposition FF would increase income taxes for individuals with federal taxable income of $300,000 or more by limiting the state’s standard or itemized deductions to $12,000 for single filers and $16,000 for joint filers.

Legislation enacted earlier this year already requires state residents with taxable income of $400,000 or more to add standard or itemized deductions of more than $30,000. The initiative appearing on Tuesday’s ballot would further toughen those deductions, according to the Tax Foundation.

A view of Colorado Springs (iStock/iStock)

Missouri

in Missouri, Amendment 3 would allow adults in the state to purchase and possess up to three ounces of marijuana. They could also grow up to six flowering plants at home.

The proposal would impose a 6% tax on the retail price of recreational marijuana if it passes.

Massachusetts

In Massachusetts, voters will decide Tuesday whether to approve a measure that would create a 4% tax on annual income over $1 million. That would be in addition to the state’s 5% flat income tax, also starting in 2023.

Under the so-called Fair Share Amendment, millionaires would essentially pay a combined top marginal tax rate of 9%, thereby eliminating the state’s 100-plus-year history of having a flat-rate individual income tax.

While proponents of the law have framed it as an effort to ensure the wealthy pay their fair share, critics have warned that the tax could have negative economic consequences, including hitting small business owners.

IRS 1040 individual income tax forms (Daniel Acker/Bloomberg via Getty Images/Getty Images)

The Tax Foundation estimated that the higher tax on wealthy Americans could reduce economic activity in the state by $6 billion by the end of 2025.

“As long as there are alternative markets or ways to shift economic activity to a more competitive state, the additional tax is likely to underperform revenue projections and outperform in its malignancy,” the group said. “One of the reasons for this is that the graduated income tax would be paid by many small businesses, as well as wealthy individuals.”