(Carolina Journal) – Gov. Josh Stein is calling a proposed constitutional amendment to lower the state’s constitutional income tax cap from 7% to 3.5% “a con, a cynical shell game and a millionaire protection cap” that will only hurt the average North Carolinian and benefit the wealthy.
Senate Bill 1080, Lower Taxes for All NC, passed on May 21 and will appear as a constitutional amendment on the ballot in November. Voters previously approved a 2018 amendment that lowered the cap from 10% to 7%.
The proposed constitutional amendment is part of the state budget framework agreement announced by leaders of the Senate and House of Representatives.
At a press conference on Wednesday, the governor said the amendment is a con because while it says it will lower taxes, it doesn’t because that is already happening by law.
“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. We have to have a balanced budget every year when revenues are needed. You know who’s going to have to pay? It’s you. Regular people every time they go buy something through the sales tax.”
North Carolina’s sales tax of 4.75% has not changed since Republicans’ historic capture of majorities in both chambers in the 2010 midterms. Under a Democratic trifecta of government, the longtime rate of 3% rose to 4% in 1991; and in 2009 rose from 4.25% to 5.75% with a temporary increase and sunset in 2011 to the present-day rate.
Stein said the record-low personal income tax of 3.99% doesn’t need to be lowered, especially at a time when he says state employees, like teachers, state troopers, and correctional officers, haven’t had a meaningful raise. Stein also referenced Secretary of State Elaine Marshall’s office receiving a significant increase in the number of business filings over the past few years, but hasn’t seen a real increase in the number of staff or pay, which she has said so herself at many Council of State meetings.
Joseph Harris, fiscal policy analyst for the John Locke Foundation, agrees that while the high income tax model was a bust for the state, lawmakers have made significant progress over the years in making North Carolina a standout among other states, and Senate Bill 1080 only reinforces that for the future.
“North Carolina has already tried the high-income-tax model, and it failed,” he said. "For years, higher rates discouraged growth and took unnecessary dollars out of hard-working families’ pockets. Thankfully, the income tax reforms that began more than a decade ago helped turn North Carolina into one of the most attractive states in the country for jobs, growth, and opportunity. Senate bill 1080 is about making sure future politicians can’t drag us back to the failed policies of the past. A 3.5% constitutional cap isn’t a con – it’s a safeguard to protect all taxpayers.”
Stein said the corporate income tax should stay at 2% and not be zeroed out by 2030. He said that during the time he was in the Legislature, when the corporate income tax was around 6.8%, the highest in the Southeast, it did create a competitive disadvantage. But he added that the disadvantage no longer exists.
“You do not need to go to zero,” he said. “That’s another over $2 billion in revenue that will be foregone in the future if we go from two to zero. Who are the beneficiaries when you eliminate the corporate income tax? It is corporations, the vast majority of which do business in North Carolina, but are not headquartered in North Carolina.”
