Midterm Elections Could Bring Higher Taxes in Some States: What Voters Need to Know

People check in for early voting at a polling location at Bank of America Stadium in Charlotte, N.C., on Nov. 5, 2022. (Sean Rayford/Getty Images)

As Americans head to polls in one of the highest turnouts for midterm elections, several major issues are on the table, such as tax policy changes that will have a significant impact on Americans’ personal financial situations.

Tax policy involves everyone from the average earner to the richest Americans, and accounts for deductions and incentives, which ultimately decide how much disposable income ends up with each household after paying the state. Like all major issues, Democrats and Republicans have prioritized different aspects of the tax policy, which will reflect in regional economic trajectories based on who gains the upper hand after votes are counted.

California’s Proposition 30

California’s income tax burden, currently the highest in the nation, is set to go even higher with Proposition 30. The measure seeks to hike taxes an extra 1.75 percent on those earning above $2 million annually for the amount higher than the threshold.

The tax revenue is planned to fund zero-emission vehicle programs—for which the state has currently budgeted $10 billion—along with wildfire response and prevention. Proponents advocate a faster realization of the shift away from fossil fuels, while opponents argue that the state’s infrastructure is woefully inadequate to accommodate millions of new electric vehicles added to the grid.

Proposition 30 will see wealthy Californians pay 16.15 percent as opposed to 13.3 percent top marginal rate on their income. Besides, the proposition does not offer incentives to couples, meaning the extra 1.75 percent excise tax will apply to single and joint tax filers.

Arizona’s Proposition 132, Colorado’s FF and 121

Arizona Proposition 132 seeks to modify the Arizona constitution to require ballot measures authorizing a tax amendment to be approved by at least 60 percent of votes cast. Presently, only a simple majority—just over 50 percent—is required. As of November 2022, nine states in the country have a supermajority requirement for constitutional amendments.

Colorado’s Proposition FF would limit state income tax deductions—like taxes, charity, and mortgage interest—to $12,000 for single filers or $16,000 for joint filers in households making more than $300,000 per year.

The proposition is set to increase the state’s income tax revenue by $100.7 million in 2023, and would be funding employees serving school meals.

While proponents cite hungry kids performing poorly in schools, opponents argue that the state should not dictate how families spend money and pay to feed children who can afford school meals.

Colorado’s Proposition 121 is looking to reduce the statutory income tax rate from 4.55 percent to 4.4 percent, retroactively effective for tax year 2022, according to the Tax Foundation.

Massachusetts Question 1

If voters pass the Massachusetts Question 1 measure, it will add a 4 percent surtax to the current 5 percent individual income tax rate for annual income above $1 million. The state has had a flat-rate individual income tax since 1917.

Millionaires based in Massachusetts will be paying a combined top marginal tax rate of 9 percent if the proposition gets approved. Critics have long warned about the economic consequences of taxing the rich, including small business owners, with the Tax Foundation estimating economic activity in the state to contract by $6 billion by the end of 2025.

“The midterm elections will be important in terms of defining which party is or isn’t in the political driver’s seat in Congress over the next two years,” says Mark Hamrick, Bankrate senior economic analyst.

Since Joe Biden became president, 43 percent of Americans have rated their personal financial situation as worse off, with 39 percent saying their finances have remained the same and 18 percent claiming they’ve gotten better, according to a Bankrate survey.