Legislative Brief
House Bill 459: Income Tax Rate Reduction Trigger Mods
Delays tax cuts to bring in needed state revenue
HB 459 Summary: Modifies cuts to the personal income tax rate by keeping the rate at 4.25 percent until 2028 and moving the start date of revenue triggers for further rate cuts from Fiscal Year 2027 to Fiscal Year 2029.
Tax triggers are trouble
- Tax triggers have a long track record of failing to support fiscally responsible budgeting. Tax triggers make it possible for lawmakers to put future tax changes in place without showing how they will affect spending or public services.
- With incomplete information about future spending requirements, policymakers in North Carolina don’t have information about the revenue needed to maintain current service levels, and the revenue thresholds in this bill aren’t tied to any growth or spending projections.
Delaying the start of personal income tax triggers would protect much-needed personal income tax revenue
- Current revenue projections suggest that this legislation would lead to a state income tax rate of 3.25 percent by 2030, compared to a possible rate of 2.49 percent in 2023 under current law. It is likely that rate reductions would continue after that and eventually reach 2.49 percent, but in the short-term North Carolina would have much-needed tax revenue.
Near-term revenue would likely be available to fund rebuilding from climate disasters in Western and Eastern NC.
Maintaining the current personal income tax rate of 4.25 percent over the 2025-2027 biennium would mean over $2 billion in state funds that North Carolina would otherwise lose to tax cuts. Delaying further cuts will bring in billions more dollars that can be invested in much-needed disaster recovery, public education, child care, and more over the coming years.
