A constitutional amendment to cap the state income tax rate at 3.5% is expected to pass the North Carolina Senate along party lines Tuesday and would move next to the state House for approval. (Photo: Galen Bacharier/NC Newsline)
North Carolina Senate lawmakers are moving forward with a constitutional amendment to cap the state income tax rate at 3.5%, starting next year.
Republican lawmakers pushed Senate Bill 1080, “Lower Taxes for All NC” through the Senate Finance committee Monday as part of the budget deal announced last week by Senate Leader Phil Berger and House Speaker Destin Hall.
It’s expected to pass the Senate on party lines Tuesday and would move next to the state House for approval. If it passes, it would join as many as five other constitutional amendments on the ballot in 2026.
At the moment, North Carolina’s personal income tax rate stands at 3.99%. It’s already slated to fall to 3.49% in 2027. If voters approve the constitutional amendment in November, the state couldn’t raise it in the future.
“The personal income tax is not the only source of revenue,” bill sponsor Sen. Michael Lee (R-New Hanover) told the committee.
Republican legislative leaders have said they plan to cut the income tax rate further in the coming years. Sen. Natalie Murdock (D-Durham) questioned why bill sponsors wanted to make the change through a constitutional amendment. Laws can be changed by future legislatures, but constitutional amendments can only be implemented or repealed by popular vote.
“If you all are already working on that path to do it through legislation, are there any concerns about the permanency of it being amended in the constitution?” Murdock asked.
Lee said lawmakers have promised voters they would reduce their personal income and property taxes. By putting the issue on the ballot, Lee said they’re allowing voters the opportunity to weigh in.
“In doing a constitutional amendment, it says … ‘If we’re going to make this promise to you, before we go back on our promise, we’re going to check in with you, so you can decide,’” Lee said.
Sen. Ralph Hise (R-Mitchell) pointed out that North Carolina borders Tennessee, which doesn’t have a personal income tax. He said that makes North Carolina less competitive in attracting business, industry and residents.
There are plenty of other options for the state to bring in revenue, he said.
“I fundamentally disagree with the state concept of an income tax,” Hise said.
But Democrats and progressive groups are opposed to capping the personal income tax at 3.5% in the state constitution.
The North Carolina Budget and Tax Center published a list of 10 reasons the amendment is a “bad deal” for the state’s future.
NC Republican leaders announce end to state budget impasse
Alexandra Sirota, the center’s executive director, criticized lawmakers for giving away tax breaks instead of listening to the priorities of residents.
She said the cuts will leave the state with less revenue for critical needs like strengthening education and public health, she said.
“North Carolinians want to see their state legislators focus on the things that make life more affordable for them, investing in childcare, housing, public schools,” she told NC Newsline, “and the reality is this income tax ballot measure will block future legislators from doing what they need to do to make sure every community and every family has what they need to thrive.”
North Carolina Association of Educators president Tamika Walker Kelly reminded lawmakers that North Carolina ranks last in the country for public school funding efforts.
The tax cuts would benefit the wealthy while harming lower-income families and those who depend on public schools, she told the committee.
“That is not fiscal responsibility — that is a permanent transfer of wealth away from our children,” Walker Kelly said. “We are already last in education funding, and we cannot afford to fall further.”
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