Ryan 2024 State Election Recap

In our 2024 election preview, we outlined two possible outcomes for election day: one in which Democrats hit their legislative goals and one in which Republicans did. Following a record turnout election, Republicans came out of Tuesday having outperformed their polls and putting them in a strong governance position at both the state and federal levels.

The Impact of Federal Partisan Changes

Before diving into any specific outcomes, it’s worth examining what the macro effect of these Republican victories will have on state governance.

First, with the caveat that the final partisan composition of the United State House of Representatives is still unclear, President-elect Donald Trump (R) will be in a strong position to extend and strengthen the tax cuts he implemented as part of the Tax Cuts and Jobs Act of 2017. Depending on the exact policies that the president-elect opts to pursue, conforming (or not) with these changes will be an ongoing priority for state tax writers.

President-elect Trump has also recently spoken about his desire to reduce or eliminate income taxes and increase tariff levies, which is in keeping with the growing number of Republican governors who have proposed replacing their state income taxes with expanded sales taxes. If the president-elect continues to push this revenue swap either rhetorically or by his policy proposals, then we can expect state policy makers to also increase their activity on this issue.

Finally, as the presidency shifts to the right, state Democratic lawmakers will see themselves as the bulwark for their values and could act more aggressively to push for their favored policies. Historically, state lawmakers will go further in trying to achieve the policy goals if they know that are locked out federally. This could take any number of forms, including new taxes on upper-income individuals or businesses, greater environment protections, or expanded entitlement programs.

State Legislative and Gubernatorial Races

Republicans’ strong showing preserved the status quo in several states. Their trifecta control over New Hampshire should continue as former-Senator Kelly Ayotte (R) ascends to the governorship. Wisconsin Democrats used the newly drawn legislative maps to make gains in the state Assembly, but they did not pick up enough seats to end longstanding Republicans’ legislative dominance. The results in Arizona are close, where Republicans will either retain their slim majority in both chambers or could keep the House but see an even split in the Senate. Finally, Democrats had hoped to win enough seats in the Kansas legislature to break up the Republican supermajority in that state, but those efforts failed.

Republicans Regain Legislative Ground They Lost in Previous Elections

Current projections also indicate that Republicans have successfully retaken at least two legislative chambers that they lost in the 2022 elections.

In Pennsylvania, the GOP was able to regain their majority in the Senate and hold their majority in the House. This places the Keystone State’s government back in the position it had been in for nearly a decade: with a Democratic governor at bitter loggerheads with a Republican-controlled legislature. During his own 2022 campaign, Governor Josh Shapiro (D) expressed openness to cutting corporate taxes; it remains to be seen whether those plans are rejuvenated in this new partisan environment.

Election officials are still tabulating votes for control over the Minnesota legislature, but current returns show Republicans are either tied or slightly ahead in the race for the state House majority. The loss of the Democrats trifecta will have real effects, particularly when it comes to crafting the state’s annual fiscal omnibus bill. With control over the House, Senate, and governor’s mansion, Democrats were able to pass progressive tax reforms in both 2023 and 2024 that included new taxes on international revenue and new public disclosure requirements for larger corporations. 

Similarly in Michigan, Republicans successfully broke up the Democratic trifecta by retaking the House. This will be a significant check on Governor Gretchen Whitmer’s (D) authority and places a hurdle in front of any attempts at major policy changes.

Democrats Had Their Best Showing in North Carolina

Democrats saw the most success in North Carolina, where they won the races for governor, lieutenant governor, and attorney general, as well as appearing to break up the Republican supermajority in the legislature. Enough legislative races are still outstanding, so it is unclear what the final legislative breakdown will be, but as of this writing, it appears that the GOP will fall below the supermajority threshold in the House.

With clear majorities in both chambers, North Carolina Republicans will still be in the driver’s seat when it comes to setting policy, but they may be losing their ability to pass a budget without regard for the governor’s veto. Governor-elect Josh Stein (D) said on the campaign trail that he is interested in some kind of tax reduction package, particularly if it provides relief for middleclass families, and this may provide a framework that Republicans can use to further their own fiscal agenda.

Remaining Governors’ Races Went as Expected but Hold Clues About Tax Policy Future

The remaining state governor’s races were not competitive this year and played out as expected. Republican candidates in Indiana, Missouri, Montana, North Dakota, Utah, Vermont, and West Virginia sailed to victory. Likewise Democratic gubernatorial candidates succeeded in Delaware and Washington.

It is too soon to tell exactly what fiscal policy will look like in these new administrations, but a few have made tax reform key parts of their campaign message. Indiana Governor-elect Mike Braun (R) repeatedly committed to cutting homeowner property taxes and capping property tax bills. Missouri Governor-elect Mike Kehoe (R) and West Virginia Governor-elect Patrick Morrisey (R) have both declared their intention to eliminate the personal income tax. North Dakota Governor-elect Kelly Armstrong (R), who opposed a ballot measure eliminating the property tax, says that he will pursue tax reform in office.

Ballot Measures

At the state level, voters generally rejected the major tax shakeups that were formally on the ballot this year but were at times amendable to smaller tax changes locally.

State Voters Reject the More Aggressive Tax Ballot Measures

In Oregon, voters overwhelmingly rejected Measure 118, which would have imposed a 3% gross receipts tax on state sales over $25 million to fund a universal basic income-style tax rebate program. A California advocacy group was funding the measure, and it was seen as a trial balloon for similar progressive measures in other states. The resounding defeat of Measure 118 (79% in opposition with 73% of the vote in) will stymy those efforts.

North Dakota Measure 4, which would have repealed the property tax, also failed with 63% against. This ballot measure was generally opposed by candidates from both parties but signals the taxpayers’ continued frustrations with rising property taxes.

A trio of initiatives in Washington that would have weakened or repealed recent Democratic policy achievements were all voted down. Initiative 2109 would have repealed the capital gains tax, Initiative 2117 would have repealed the cap-and-trade system imposed in 2021 to curb greenhouse gas emissions, and Initiative 2124 would have allowed employees and self-employed people to opt out of the payroll tax imposed by the state long-term care program.

While these more systemic efforts failed, a number of more narrowly focused measures did pass. These included:

• Arizona Proposition 312, which permits property owners to apply for a refund from the locality for costs resulting from a failure to enforce laws prohibiting certain public nuisance laws.
• Colorado Amendment G, which expands the disabled veteran’s property tax exemption.
• Florida Amendment 5, which pegs the state’s homestead exemption to inflation.
• Georgia Amendment 1, which establishes a statewide homestead tax exemption.
• Georgia Referendum A, which boosts the personal property tax exemption from $7,500 to $20,000.
• New Mexico Amendment 1, which extends the disabled veteran property tax exemption to all disabled veterans (or their widows) in proportion to the federal disability rating.
• New Mexico Amendment 2, which boosts the veterans’ property tax exemption.

There was also a non-binding advisory question in Illinois that passed and expressed support for establishing an extra 3% tax on income over $1 million and allocating the resulting revenue to property tax relief.

In closing, Ryan team members stand ready to discuss the impacts of these changes with you at any time. Our Advocacy team is actively following state and federal developments and working with elected officials across the country on taxpayer-friendly initiatives.

TECHNICAL INFORMATION CONTACTS:

Holly Reed
Principal
Ryan
469.399.4556
holly.reed@ryan.com

Ryan Maness
Director
Ryan
332.282.5668
ryan.maness@ryan.com

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com