Three tax votes in November that will affect high earners

A version of this article appeared in CNBC’s Inside Wealth newsletter, a weekly guide to the high-net-worth investor and consumer.Sign upto receive future editions, straight to your inbox.

Voters will decide whether to raise or lower taxes on the wealthy in multiple states next month, with California leading the way with a potential wealth tax.

The K-shaped economy has stirred a rise in populism and calls for the wealthy to pay their “fair share,” especially in Democratic-led states. At the same time, rising competition among states to attract high earners is leading to ballot initiatives to cap or even lower taxes.

“Over the last few years, we’ve seen a divergence in state income taxes and taxes on high earners,” said Jared Walczak of the Tax Foundation. “We’ve seen many states cut individual taxes and others going in the opposite direction. It used to be the average tax rate was 6%. Now that middle has been hollowed out.”

The votes add fuel to the national debate over taxing the wealthy. In Massachusetts, a millionaire tax passed in 2022, imposing an extra 4% levy on those making more than $1 million a year. The tax has raised far more revenue than predicted, generating over $3 billion in the 2025-2026 fiscal year. Yet a study of IRS data by the Boston-based Pioneer Institute found that Massachusetts lost over $4 billion in adjusted gross income in 2023 from high earners leaving the state.

Rhode Island joined the “millionaire tax” club this summer, passing legislation that added a phased, 3% surcharge to $1 million-plus earners, creating a top rate of 8.99% by 2029. New York’s tax on high-end second homes faced new legal challenges this week, as a state judge ruled that the city needs to re-do notifications to potential taxpayers and businessmen Wilbur Ross and Steve Wynn filed suit against the tax claiming it’s unconstitutional.

At the other end of the political spectrum, more than a dozen states are in the process of reducing or eliminating their income taxes over time. South Carolina, Arkansas, West Virginia, Georgia, Indiana, Kentucky, and Utah passed income tax reductions this year, with others approving revenue triggers that lower rates based on state revenue.

In November, voters will head to the polls to decide on ballot measures that could significantly affect high earners and wealth migration. Three states to watch:

California

California’s Billionaire Tax Act has divided Democrats, split Silicon Valley and driven several of the state’s billionaires to move to Florida. The measure would impose a one-time tax of 5% on the total net worth of California residents worth $1 billion or more. Since it needs only a simple majority of voters to pass, and would tax about 200 of the state’s richest residents, many experts predicted it would pass.

Yet a recent University of California, Berkeley poll shows 45% in favor and 43% opposed. Two competing ballot measures are likely to sow confusion and possibly defeat the billionaires tax if they receive more votes.

California’s billionaires are fighting back. Sergey Brin, John Doerr, Patrick Collison, Michael Moritz, Eric Schmidt, Max Levchin and others have contributed a total of more than $180 million to groups opposing the tax. Tax advisers are also counseling the state’s billionaires on strategies to lower their taxable net worth, such as investing in Treasuries or transferring real estate to personal ownership.

Colorado

Voters will decide whether to replace Colorado’s flat tax of 4.4% with a graduated income tax that raises the rates for high earners. The tax would increase to 7.4% for those making more than $500,000 a year and to 8.4% for income over$1 million.

The income thresholds apply to both single filers and joint filers. So a couple making more than $500,000 a year combined would be subject to the 7.4% rate on income above the threshold. Analysts estimate the higher rates would impact the top 3% of taxpayers.

Individuals or couples making less than $100,000 a year would get a tax cut, with a rate as low as 3.7% depending on income.

The changes are projected to raise about $2.7 billion a year for education, healthcare and other public services. Opponents of the measure, including the state’s Democratic Governor, Jared Polis, and the Colorado Chamber of Commerce, argue it will reduce the state’s competitiveness and drive businesses to other states.

Americans for Tax Reform, the conservative advocacy group, said the new tax would hurt businesses, since it also applies to pass-throughs.

“Colorado’s flat tax has provided taxpayers and businesses with a simple and predictable tax system,” the group said. “The ballot measure would replace it with a system that penalizes greater income, investment and success.”

Washington State

Before this year, Washington was one of nine states with no personal income tax. The low-tax environment helped attract tech giants like Microsoft and Amazon as well as large outposts for Apple, Alphabet and Meta.

In March, the state passed a millionaire’s tax, imposing a 9.9% tax on household income over $1 million. The tax is scheduled to take effect in 2028, with collections starting in 2029. It’s projected to raise up to $4 billion from about 25,000 taxpayers.

Next month, voters will get a chance to kill the tax before it even takes effect. The ballot measure called Initiative 645 would repeal the millionaire’s tax and prohibit future state and local taxes on income.

Supporters of the measure say the millionaire’s tax is a pretext to tax all Washingtonians and they want to protect small businesses and working families. Opponents say the tax is needed to fund education, healthcare and other services.

The controversial wording of the Initiative could swing the vote. The ballot initiative includes language that the measure would “decrease funding” for public K-12 schools, universities and healthcare. A recent poll showed that when the budget language was included, a majority of those polled said they would vote “no.”