10 reasons NC’s income tax cap amendment is a bad deal for the state’s future
As lawmakers move quickly to advance a constitutional amendment that would cap North Carolina’s income tax rate at 3.5%, North Carolinians should look beyond the political framing of “tax relief” and ask a bigger question:
What would this amendment mean for North Carolina’s long-term economic future?
The proposed amendment is part of a broader, bad-deal budget framework announced by House and Senate Republican leaders. That framework includes overdue raises for teachers and state employees, continued personal income tax cuts primarily benefiting the wealthy, the scheduled elimination of the corporate income tax to benefit profitable corporations, and a proposal to put a 3.5% income tax cap as well as a property tax cap before voters in November.
Raises for teachers and state employees are important and long overdue. But those raises should not distract from the larger issue: Lawmakers are trying to lock today’s tax-cut agenda into the state constitution, making it harder for future voters and future leaders to sustain those raises and fund the schools, child care, health care, infrastructure, disaster recovery, and workforce investments North Carolina needs to thrive.
Here are 10 reasons the income tax amendment is a bad idea for North Carolina.
1. It will not make North Carolina more affordable.
Supporters may describe the amendment as a way to keep taxes low, but it does not lower the cost of child care, housing, health care, groceries, utilities, transportation, or insurance.
In fact, it could make affordability worse by limiting the revenue needed to fund the public investments that help families manage those costs.
A Well-Being Budget asks whether people can afford the basics, live healthy lives, and fully participate in the economy. This amendment moves North Carolina in the opposite direction by cutting off revenue for the investments that support affordability and well-being.
2. It would lock in tax breaks for the wealthy few and profitable corporations.
Income tax cuts deliver the largest benefits to the wealthy. Corporate income tax elimination benefits profitable corporations. When those revenue sources are reduced or capped, the need for public revenue does not disappear.
Instead, the costs are more likely to be shifted onto low- and middle-income families through sales taxes, property taxes, fees, service cuts, and other revenue sources that take a larger share of income from people who have less and widen the wealth gap.
This means millionaires and wealthy households are the primary beneficiaries, while working families are more likely to pay in other ways.
3. It is unnecessary.
North Carolina’s Constitution already limits income tax rates. In 2018, lawmakers put a constitutional amendment on the ballot to lower the income tax cap from 10% to 7%.
Now, lawmakers are trying to lower the cap again — this time to 3.5%.
But lawmakers do not need another constitutional amendment to keep taxes low. They already have the power to set income tax rates through the regular legislative process. In fact, since 2013, legislative leaders have repeatedly used that power to reduce taxes for wealthy households and corporations.
The real purpose of this amendment is not to create a limit. The purpose is to make today’s tax-cut agenda much harder for future voters and lawmakers to undo.
4. It would cut off revenue that grows with the economy.
The income tax is one of the state’s most important revenue tools because it can grow with the economy. As incomes rise and the economy expands, income tax revenue can help the state keep up with population growth, rising costs, and long-term needs.
A constitutional cap would limit that flexibility. It would make it harder for North Carolina to permanently address the child care crisis, meet the constitutional promise of a sound basic education, strengthen public health, maintain infrastructure, and prepare for disasters.
Unlike a regular tax law, a constitutional amendment is difficult to change. That means future leaders could be stuck with today’s limits even when tomorrow’s needs look very different.
5. It would weaken North Carolina’s long-term economic future.
A strong economy does not happen by accident. It depends on strong public schools, affordable child care, reliable infrastructure, healthy communities, disaster readiness, and a skilled workforce.
Those are not extras. They are the foundation of long-term economic success for workers, families, communities, and employers.
By permanently limiting one of the state’s most important revenue sources, the amendment would make it harder for North Carolina to build and maintain that foundation. The harm may not show up all at once, but over time it can mean crowded classrooms, weaker services, deferred infrastructure, fewer supports for families, and communities less prepared for growth or crisis.
6. It would take choices away from future voters and lawmakers.
Economic conditions change. Public needs change. Disasters happen. Costs rise. Communities grow. Future voters should be able to choose leaders who can respond to the needs of their time.
A constitutional income tax cap would make that harder. It would block future lawmakers from making different choices than the ones being made today, even if voters want a different path.
This is especially important because the amendment would be difficult to reverse. Once written into the state constitution, the limit would shape budget decisions for years and generations to come.
7. It would ripple far beyond the tax code.
This amendment would affect the building blocks of everyday life and long-term economic strength: children’s classrooms, child care access, health care, public safety, infrastructure, disaster response, local services, workforce readiness, and the well-being of families and communities.
A budget is more than numbers on a page. It determines whether North Carolina has the public systems needed to help people live stable lives and participate fully in the economy.
8. It could hit rural counties especially hard.
Many counties rely on state revenue to help stabilize their local budgets. That is especially true for more rural counties with smaller tax bases and fewer local revenue options.
If the state limits its own ability to raise revenue, those counties could be hit particularly hard. And with a property tax levy limit also on the table, they may face even greater pressure to cut services, delay investments, raise local taxes or fees, or fall further behind communities with stronger local tax bases.
This matters because state tax policy does not affect every community equally. Limits on state dollars can deepen geographic inequities and make it harder for rural communities to meet basic needs.
9. Revenue impact: Lawmakers need to explain the cost.
By cutting the maximum allowable rate from 7% to 3.5%, this amendment would block our state from generating over $14 billion in annual public revenue — an amount that will grow over time.
The revenue impact is central to this story. Before lawmakers ask voters to change the state constitution, North Carolinians deserve to know $14 billion and more in future years would be taken off the table. How would lawmakers balance the budget — cuts to services, higher sales taxes, fees?
The lost capacity from this cap should be considered alongside the state’s existing and future needs, including teacher pay, public schools, child care, health care, housing, infrastructure, disaster recovery, and support for local governments.
The question is not only what the amendment does to tax rates. The question is what North Carolina will be less able to fund because of it.
10. It could affect borrowing costs and long-term investments.
Constitutional tax limits can reduce fiscal flexibility. That matters when governments need to borrow for infrastructure, schools, housing, water systems, disaster recovery, and other long-term investments.
Major credit rating agencies consider a government’s ability to raise revenue when evaluating creditworthiness. When revenue options are restricted, borrowing can become more expensive.
This risk becomes even more important if lawmakers also advance limits on local property taxes. North Carolina could end up with constitutional limits on two key revenue sources: state income taxes and local property taxes. That could jeopardize the ability of state and local governments to borrow affordably and make the kinds of investments workers, families, and employers are asking for.
Bottom Line
North Carolinians are being sold a bad deal.
The income tax amendment would not make life more affordable. It would not solve the child care crisis, strengthen public schools, improve health care access, build infrastructure, prepare communities for disasters, or support long-term economic growth.
Instead, it would lock today’s tax-cut agenda into the state constitution, protect tax breaks for wealthy households and profitable corporations, and leave future voters and lawmakers with fewer tools to invest in North Carolina’s future.
Teachers and state employees deserve meaningful raises. But overdue raises should not distract from the long-term harm of a constitutional amendment that would lock North Carolina into permanent underinvestment.
This is not fiscal responsibility. It is a bad deal for North Carolina’s future.
