FGMK Tax Summary of Key 2026 Tax Election Results

On November 3, 2026, voters in 16 states decided approximately 30 statewide tax measures, and several of those results will reshape how states tax individual and business income for years to come. Most notably, Colorado voters approved Amendment 87 which replaces the state’s 4.4 percent flat income tax with a graduated income tax that imposes rates of up to 8.4 percent on taxable income exceeding $500,000. The Associated Press called the race on Friday, November 6th, with the measure receiving approximately 51.4 percent of the vote. The election results also saw Washington voters reject Initiative 645 and thereby preserve the state’s new 9.9 percent tax on income exceeding $1 million, while California voters approved Proposition 3 and made permanent the higher income tax rates that apply to the state’s top earners. Conversely, voters in North Carolina and Iowa approved constitutional amendments that further restrict the ability of their legislatures to raise income taxes. This article addresses the key state income tax measures decided by voters, the interaction of such measures with the federal tax changes enacted under the One Big Beautiful Bill Act (the “OBBBA”), other notable state tax ballot results, and planning considerations for taxpayers in advance of year-end.

Colorado Graduated Income Tax (Amendment 87)

Colorado has taxed income at a single rate, currently 4.4 percent, since 1987. Amendment 87 repeals the provision of the Taxpayer’s Bill of Rights (“TABOR”) that required Colorado to tax all income at a single rate, and it enacts six graduated brackets for taxable years beginning on or after January 1, 2027. The measure only required a simple majority.

The new rates apply to Colorado taxable income as follows:

• $25,000 or less: 3.7 percent (reduced from 4.4 percent)
• $25,001 to $100,000: 4.2 percent (reduced from 4.4 percent)
• $100,001 to $500,000: 4.4 percent (unchanged)
• $500,001 to $750,000: 7.4 percent
• $750,001 to $1,000,000: 7.9 percent
• More than $1,000,000: 8.4 percent

Taxpayers with taxable income at or below $500,000 will save up to $325 annually. However, the increase above that threshold is significant. According to the state’s Blue Book analysis, a taxpayer with $875,000 of taxable income will owe $50,050 rather than $38,500, and a taxpayer with $2 million of taxable income will owe $143,925 rather than $88,000.

Several features of the new law warrant particular attention.

• Corporate income is included. The graduated income tax rates apply to business income as well as individual income. Thus, C corporations with Colorado taxable income exceeding $500,000 will also face higher rates.
• No separate brackets for joint filers. Unlike the federal income tax rate schedules, the Colorado brackets do not double for married couples filing jointly (e.g., two spouses each earning $300,000 will cross the $500,000 threshold together).
• The competing measure failed. Voters rejected Proposition 136 which would have capped the state income tax rate at 4.4 percent and effectively blocked the new upper brackets. Its defeat removes the legal uncertainty that would have arisen had both measures passed.

Estimates of the new revenue range from approximately $2 billion to $2.7 billion annually. Notably, business groups, including the Colorado Chamber of Commerce, opposed the measure, and the legislature will now determine how the state spends the additional revenue.

Washington Millionaires Tax (Initiative 645)

Washington voters rejected Initiative 645 by a margin of approximately 58 percent to 42 percent, and the repeal campaign conceded on Wednesday, November 4th. The initiative would have repealed the 9.9 percent tax on household income exceeding $1 million that the legislature enacted in March 2026 under SB 6346, and it would have prohibited state and local income taxes altogether. As a result, Washington, which had been one of the few states that does not tax earned income, will now tax the income of high earners.

The key features of the Washington tax are as follows:

• Rate and threshold: A flat 9.9 percent tax on Washington taxable income exceeding $1 million per household.
• Effective date: The tax begins January 1, 2028, which provides affected taxpayers a planning window that Colorado taxpayers do not have.
• Application to nonresidents: The tax applies to residents, part-year residents, and nonresidents with Washington-source income, including wages for services performed in the state, income from Washington businesses and passthrough entities, and gains from Washington real or tangible personal property.
• Offsetting relief: The same legislation eliminates sales tax on certain everyday items (e.g., diapers and personal hygiene products) and expands a tax credit for lower-income families beginning in 2029.

Nonetheless, the vote does not end the matter. Opponents have pending legal challenges asserting that the tax violates the Washington constitution, and taxpayers should monitor those cases before making any irreversible residency or restructuring decisions.

California High-Income Tax Rates (Proposition 3)

California voters approved Proposition 3 with approximately 59 percent of the vote, and the Associated Press called the race early on Wednesday, November 4th. The measure makes permanent the higher income tax rates first enacted under Proposition 30 in 2012 and extended under Proposition 55 in 2016. Absent Proposition 3, such rates would have expired in 2031.

The higher income tax rates apply to individuals earning approximately $371,000 (the 2025 amount adjusted annually for inflation) and couples earning approximately $742,000 (the 2025 amount adjusted annually for inflation). The top rate remains 12.3 percent, and the separate 1 percent mental health services tax on income exceeding $1 million keeps California’s top combined rate at 13.3 percent, the highest in the nation. Accordingly, taxpayers who built a 2031 rate reduction into long-term projections should revisit those assumptions.

However, voters rejected the proposed billionaire tax, Proposition 40, which would have imposed a one-time 5 percent tax on the net worth of residents worth more than $1 billion. They also approved Proposition 42, a competing measure which blocks similar wealth tax proposals going forward.

Constitutional Limits on Income Tax in North Carolina and Iowa

While Colorado, Washington, and California voters retained or increased taxes on high earners, voters in North Carolina and Iowa added new constitutional limits.

• North Carolina: Approximately 62 percent of voters approved an amendment that lowers the constitutional cap on personal and corporate income tax rates from 7 percent to 3.5 percent. The state’s personal rate is currently 3.99 percent and is scheduled to fall to 3.49 percent in 2027. Thus, the amendment effectively locks in that reduction and prohibits any future increase above 3.5 percent absent another constitutional amendment.
• Iowa: Approximately 56 percent of voters approved Amendment 1, which requires a two-thirds vote in both chambers of the legislature to raise individual or corporate income tax rates or to establish a new income tax. Iowa currently imposes a flat 3.8 percent individual rate.

Missouri offers a useful contrast. In August, Missouri voters rejected Amendment 5, which would have eliminated the state income tax entirely. In the same year that Colorado and Washington moved to tax high earners more heavily, an effort to repeal an income tax outright failed at the ballot box.

These results widen the gap between high-tax and low-tax states. For business owners and executives weighing where to live, work, or locate operations, the difference in top marginal rates between Colorado (8.4 percent) and North Carolina (no more than 3.5 percent) has grown to nearly five percentage points, and North Carolina’s side of that gap is now written into its constitution.

Interaction with the OBBBA

As addressed in FGMK’s prior article, President Signs One Big Beautiful Bill Act into Law, the OBBBA raised the state and local tax (“SALT”) deduction cap to $40,000 for the 2025 tax year, increasing to $40,400 in 2026 and by one percent thereafter through the 2029 tax year. However, the expanded cap is subject to an income-based phaseout that begins at a modified adjusted gross income (“MAGI”) threshold of $505,000 for the 2026 tax year with the $10,000 SALT deduction limit reached once MAGI approximates $606,333. The SALT cap for all taxpayers resets to $10,000 for the 2030 taxable year.

The timing of these thresholds matters. The new Colorado brackets begin at $500,000 of taxable income, almost exactly where the federal SALT benefit begins to phase out. As a result, most taxpayers who will pay the higher Colorado income tax rates will receive little or no additional federal deduction for such taxes. The same holds true for Washington taxpayers with income exceeding $1 million and California taxpayers in the top brackets.

Two other OBBBA provisions should be considered given the election results.

• PTET regimes remain available. The OBBBA preserved the passthrough entity tax (“PTET”) regimes that more than 30 states have adopted since 2018, despite earlier House and Senate proposals that would have limited them. Owners of partnerships and S corporations may still elect to pay state income tax at the entity level and thereby reduce the federal taxable income allocated to them. Thus, owners facing higher Colorado and California income tax rates should reevaluate the states’ PTET regimes if they have not previously elected PTET.
• Itemized deductions are limited for top-bracket taxpayers. For taxable years beginning after December 31, 2025, taxpayers in the 37 percent federal bracket have the benefit of their itemized deductions effectively limited to the 35 percent rate. Any state tax such taxpayers may still deduct as individuals is therefore worth less than in prior years.

FGMK’s earlier coverage of the legislation as it passed the House, One Big Beautiful Bill Act Clears House by Single Vote, traces how these SALT and itemized deduction provisions, which ended up in the final legislation, evolved during the legislative process.

Other Key State Tax Results

The following provides a quick overview of some other pertinent election results regarding taxes.

• Arizona grocery tax cap (Proposition 316): More than 61 percent of voters approved a 2 percent cap on local grocery taxes and a requirement for voter approval before cities impose or raise them.
• Colorado revenue cap (Proposition NN): Voters approved an increase in the TABOR revenue cap. Notably, the new Amendment 87 revenue is also exempt from the TABOR limit as a voter-approved revenue change.
• Florida homestead exemption (Amendment 3): Voters approved an expansion of the homestead exemption from non-school property taxes from $50,000 to $150,000 in 2027 and $250,000 in 2028, with inflation adjustments beginning in 2029. The measure also lowers the assessment cap on non-homestead property from 10 percent to 5 percent. With an estimated $12 billion revenue reduction, local governments may seek to raise rates on property that remains in the tax base, which makes this result important for owners of commercial and rental real estate.
• Illinois Millionaire’s Surcharge Referenda: Voters in Chicago and Cook County overwhelmingly supported non-binding advisory referenda advocating for income tax surcharges on high earners. In Chicago, approximately 80 percent of voters backed a general proposal to direct revenue from a millionaire surcharge to increase funding for public schools. Across Cook County, more than 70 percent of voters supported a more specific measure for Illinois to adopt a 3 percent income tax surcharge on income over $1 million, splitting the proceeds equally between residential and commercial property tax relief and public education funding. Enacting a millionaire income tax surcharge requires an Illinois constitutional amendment. As a result, a three-fifths supermajority vote in both chambers of the Illinois General Assembly would be required to place the measure on the ballot, followed by statewide voter approval. While November 2028 is the earliest that the measure could be on the ballot, Illinois taxpayers should consider this issue as part of their tax planning moving forward.
• Louisiana senior property tax relief: Voters approved several property tax amendments, including an optional local exemption of up to $30,000 in assessed value for homeowners age 65 and older and an increased $150,000 income limit, which was previously set at $100,000, for the assessment freeze.
• North Carolina property tax levy limit: Voters approved an amendment requiring the legislature to limit the growth of local property tax levies.
• Tennessee statewide property tax prohibition (Amendment 2): Approximately 67 percent of voters approved an amendment that prohibits the state from levying or authorizing a statewide property tax.

Measures voters rejected:

• Oklahoma voters rejected tighter property assessment limits (State Question 847).
• Massachusetts voters rejected a change to the state’s revenue limit formula (Question 5).
• Utah voters rejected a 60 percent voter threshold for tax-raising initiatives (Amendment B).
• Wyoming voters rejected a homestead exemption of 50 percent of assessed value (Initiative 1).

Final Thoughts and Planning Considerations

The Colorado changes take effect in less than two months, so affected taxpayers should act now. Washington taxpayers have more time; however, the decisions they make in 2026 and 2027 will shape their exposure when the tax begins in 2028. Taxpayers should evaluate the following items with their advisors.

• Accelerate Colorado income into 2026. Taxpayers who expect Colorado taxable income exceeding $500,000 in 2027 should consider accelerating bonuses, capital gains, or other discretionary income into 2026, while the 4.4 percent flat rate still applies. Taxpayers selling a business should also weigh whether an installment sale remains advisable, since future installments will fall under the higher brackets.
• Revisit the PTET election. Owners of partnerships and S corporations in Colorado and California should reevaluate the PTET election each year.
• Model the impact on Colorado C corporations. Because the graduated rates also apply to corporate income, C corporations with Colorado taxable income exceeding $500,000 should model the effect of the new rates on cash flow, estimated payments, and any planned transactions.
• Review residency and sourcing. Washington taxes nonresidents on Washington-source income, so a move out of state will not eliminate exposure on wages earned or property sold in Washington. Taxpayers considering a change of domicile should document it carefully and understand which income the former state may still tax.
• Update long-term projections. California taxpayers who expected top rates to decline in 2031 should update their models, and North Carolina taxpayers may plan with greater certainty around a rate that cannot exceed 3.5 percent.
• Monitor the courts. Legal challenges to the Washington tax remain pending. Taxpayers should avoid irreversible steps that depend on the outcome.

As the tax landscape continues to evolve, please reach out to your FGMK tax advisor to discuss the potential impacts of tax law changes, including new state taxes and the integration of federal tax law changes as enacted under the OBBBA.