Constitutional amendment would require voter consent for all future income tax hikes in North Carolina.
North Carolina, in addition to being the site of a battleground U.S. Senate race this November, will also have a general election ballot featuring two measures that, if approved by voters (which polling shows is likely), would install strong safeguards against future income and property tax hikes. Back in May, the North Carolina Senate and House passed SB 1080, a proposal to reduce North Carolina’s constitutional income tax cap, which stands at 7.0 percent today, down to 3.5 percent starting next year.
North Carolina’s flat income tax rate is already scheduled to fall from 3.99 percent to 3.49 percent on January 1, 2027, which means that passage of the state income tax cap reduction amendment this November would effectively require all future proposals to raise the state income tax to receive voter approval. In opposing this income tax cap reduction, progressive state legislators and Governor Josh Stein (D-N.C.), along with his predecessor and current U.S. Senate candidate, Roy Cooper (D), are making it clear that they intend to raise state income taxes if Democrats are able to retake control of the North Carolina General Assembly.
During committee hearings on SB 1080 this spring, opponents of the income tax cap reduction previewed the chief arguments they are taking to voters. Take the testimony presented to legislators by NC Budget and Tax Center’s Alexandra Sirota, who asserted that reducing the income tax cap would force budget cuts, which is verifiably false. Gov. Stein has subsequently repeated that same falsehood. The fact that Gov. Stein, Roy Cooper, and other opponents of the income tax cap reduction are relying on falsehoods and faulty premises is indicative of the weak case they have to make before voters.
“Sure it’s great to lower taxes, but you’re also going to stop services, you’re going to slow services down, you’re going to squeeze people dry,” Rep. Marcia Morey (D-Durham) said before the vote to refer the income tax cap reduction to the ballot. Rep. Morey and other opponents of the amendment to reduce the income tax cap, based on their own arguments, seem to not understand that the amendment doesn’t force further income tax cuts, but will simply require voter approval to raise the rate back above 3.5 percent. It’s either that, or Rep. Morey and other opponents do realize the amendment won’t force further income tax rate cuts, but they want voters to incorrectly believe it will. Either way, it’s not good.
The truth is, reducing the state income tax cap to 3.5 percent will not trigger more income tax relief, as much as some wish that were the case. The measure to lower the constitutional income tax cap, if approved this November, will prevent the North Carolina’s income tax rate from going up again without voter approval, but it won’t force further rate reduction and therefore won’t depress state tax collections.
In opposing the income tax cap reduction, Roy Cooper, Gov. Josh Stein, and legislative Democrats in North Carolina are making it clear they want to raise North Carolina’s income tax if they get back in power and they want the ability to do so without voter consent. Not only does Roy Cooper support a host of federal tax hikes, he very much wants North Carolina’s top income tax rate to once again be the highest income tax rate in the southeast, as was the case until Republicans ended more than a century of Democrat rule in 2010.
In fact, Roy Cooper and Josh Stein think that even the current income tax cap of 7.0 percent is too restrictive. They made that clear when they opposed the 2018 constitutional amendment to cut the state income tax cap from 10 percent to 7.0 percent. We don’t know exactly how high Cooper, Gov. Stein, and legislative Democrats would like to see North Carolina’s income tax rate go, but we do know it’s higher than 7.0 percent.
More than $9M was spent in opposition to the 2018 income tax cap reduction measure, while zero dollars were spent in favor of it. The measure passed with support from more than 57 percent of voters. Polling by the John Locke Foundation shows the income tax cap reduction amendment has bipartisan support, with more than half of surveyed Democrats expressing support for the ballot measure, along with 80 percent of Republicans and 65 percent of independents.
The constitutional amendment to reduce North Carolina’s income tax cap is, at its core, about consent. Voter enactment of the income tax cap reduction this November won’t lead to more tax cuts, but it will mean that voter consent will be required to raise the income rate in the future.