North Carolina Voters Weigh Halving Income Tax Cap to 3.5%

North Carolina voters will decide Tuesday whether to cut the state constitution's maximum income tax rate from 7% to 3.5%. The cap would halve the ceiling on what the state can charge individuals and corporations through income taxes, and reversing it later would require another constitutional amendment.

The measure is called "Lower Taxes for All NC," but it would not lower anyone's taxes immediately. The state's individual income tax rate currently stands at 3.99%. Under legislation that has already passed, the rate is scheduled to fall to 3.49% in 2027, then to 3.24% in 2030 and 2.99% in 2033, according to NC State's Poole College of Management.

What does the amendment actually change?

The amendment binds the future, not the present. If approved, raising income taxes above 3.5% would require a new constitutional amendment — approval by three-fifths of both chambers of the state legislature and then a majority of voters.

Supporters frame the restriction as protection against future tax increases. Critics warn it could leave the state with fewer ways to raise money for public services during a downturn.

The vote lands amid a national affordability squeeze. Forty-eight percent of registered voters named the rising cost of living as their top issue in a Reuters/Ipsos poll released Tuesday. Inflation surged to 3.6% in September, up from 3.4% in August, according to the Commerce Department.

How did North Carolina get here?

Republicans won both chambers of the General Assembly in 2010 and have held power since 2011. They have held enough seats to enact legislation without support from the two consecutive Democratic governors in office since 2017.

In 2013, the legislature replaced the state's graduated income tax brackets with a flat tax and has since reduced corporate taxes. In 2018, voters approved a constitutional amendment lowering the maximum income tax rate from 10% to 7%, with less than 60% support.

The new amendment needed no signature from Democratic Gov. Josh Stein, because North Carolina governors cannot veto proposed constitutional amendments. Stein opposes it. At a May press conference, he said the initiative would let lawmakers cut taxes for the wealthy while raising pressure to increase the sales tax.

"It will not put any more money in anyone's pockets," Stein said. "But what it will do is make regular people pay the consequences of it next year and years into the future because it will insulate the very wealthy from ever having an increase in their income tax."

State Sen. Michael Lee, a Republican sponsor of the legislation, said the cap builds on the legislature's record. "Our tax reforms have produced more than a decade of strong revenue growth while letting people keep more of what they earn, and this amendment locks in that progress," Lee said in a statement to WECT.

How much revenue is at stake?

North Carolina collected roughly $17 billion in individual income taxes in the 2024-25 fiscal year. That sum accounted for nearly half of the state's $34.6 billion in General Fund revenue, according to the North Carolina Office of State Budget and Management, and helps fund public education, health care and other services.

Alexandra Sirota, executive director of the NC Budget & Tax Center, warned in a September statement: "These tax amendments won't cut anyone's taxes. But they would make it more difficult for future lawmakers to fairly raise the revenue needed to meet costs through a higher rate on millionaires, billionaires, and highly profitable corporations."

Is this part of a wider tax fight?

Yes. North Carolina voters will also decide Tuesday whether to let the legislature cap how much local governments can raise property taxes. Nine income- and wealth-tax measures are on ballots in six states, according to Ballotpedia.

Colorado voters face competing proposals: one to replace the state's 4.4% flat income tax with a graduated rate up to 8.4%, another to cap rates at 4.4%. Iowa voters are weighing a two-thirds legislative supermajority requirement for income tax increases. Washington voters will decide whether to repeal a new 9.9% tax on household income above $1 million. California's Proposition 40 would impose a one-time 5% wealth tax on residents worth more than $1 billion — a measure opposed by Google cofounder Sergey Brin.

The broader economy adds pressure. The war in Iran has pushed oil prices up about 68% over the past year, feeding into consumer costs. Polls show Democrats gaining traction even in some deeply red states on affordability, with Michigan's Dr. Abdul El-Sayed holding a double-digit lead over Republican Mike Rogers. Republicans in Congress countered earlier this year with the bipartisan 21st Century Road to Housing Act, aimed at accelerating homebuilding and reforming zoning.

Tuesday's result will show whether voters accept a permanent ceiling as the answer to affordability — or read it, as Stein does, as a constraint with no immediate payoff.