North Carolinians to vote on income, property tax limits after lawmakers OK ballot questions

Voters this fall will be asked whether North Carolina should cap the state’s income tax rate and limit the ability of local governments to raise property taxes. 

The GOP-led General Assembly on Wednesday approved two Constitutional Amendment proposals for the November ballot. One of the proposals seeks to permanently cap the state's income tax rate at 3.5%. The other proposal aims to regulate how quickly local governments can increase property tax rates. It doesn’t include a specific cap for property tax rate increases — bill sponsors say the amendment has to pass first before they write the details into law. 

The amendments passed mostly along party lines Wednesday with support from Republicans and opposition from Democrats. Republicans say the amendments could provide relief to North Carolinians who are concerned that the state is becoming less affordable. A rising cost of living in the U.S. is a top concern of voters ahead of the midterm elections, recent polls have shown. 

Republicans said the property tax cap is needed because municipal governments have hiked property taxes unnecessarily — undermining state lawmakers’ efforts to make North Carolina a desirable place to live.

State Rep. Brian Echevarria, a Cabarrus County Republican, said North Carolinians aren’t being “priced out” of their homes by market forces — but are being “taxed out” of their homes by local governments. “So when high property taxes cause hardship and pressure people out of their homes, it is the government's fault,” he said.

Democrats said that by targeting two major sources of revenue for state government — as well as cities and counties — the amendments would go too far in limiting revenue and could force cuts to schools, police and other government services. They also disputed accusations that local governments are spending money frivolously. Legislative Republicans are underfunding services statewide and then blaming municipal governments for raising taxes to fill their budget holes, Democrats said. 

“We need to be honest with our people, and we need to be honest with ourselves in this chamber about what is driving these costs and the real consequences of tying the hands of our local government,” said state Rep. Maria Cervania, D-Wake.

Democrats framed the amendments as “messaging bills” and “political theater” that Republicans would use to incentivize their voters to show up to the polls this November. Midterm elections are historically difficult for the party that controls Congress and the White House. Senate Minority Leader Sydney Batch, D-Wake, said Republicans are wasting time on amendments, adding that they wouldn't do "[anything] for anyone in North Carolina to actually put food on their table, a roof over their head or educate their children."

Constitutional amendment proposals need supermajority-level support to be put on ballots. That means 30 senators need to approve of the proposals, and 72 representatives in the House. Republicans, who have proposed the amendments, have 71 seats in the House. They needed every member of the GOP caucus on board, plus at least one other lawmaker.

Republicans on Wednesday received support from two House members from Mecklenburg County who recently left the Democratic Party: state Reps. Carla Cunningham and Nasif Majeed. The members, who served as Democrats for multiple terms, became unaffiliated earlier this year after losing the Democratic party’s primary election. 

Majeed said nothing during debate of the proposed amendments. Cunningham weighed-in during the discussion of the proposed property tax regulation, saying: “Let the people choose … Let them go to the polls and make the decision if they want their property taxes or [a] levy put in place.”

The House had originally planned to vote on the amendment proposals Tuesday afternoon, but the chamber's leader delayed the start of session for more than an hour as the Republican Party caucus engaged in closed-door talks. House Speaker Destin Hall eventually announced he was taking the amendments off the calendar and would try again Wednesday to pass them.

A Hall spokeswoman said Tuesday that the speaker was confident he had the votes to pass the amendment proposals on Wednesday.

Income tax cap

Under current law, the state can tax income at a maximum rate of 7%. Voters in 2018 approved an amendment lowering the maximum possible income tax rate, for either people or corporations, from 10% to 7%. The new proposed amendment would lower that cap to 3.5%  — lower even than the 3.99% tax rate in place now, or the 4.25% tax rate people paid on the 2025 taxes they just filed last month. 

Senate Republicans tried pushing a less aggressive income tax cap amendment in 2024, which would've lowered the cap to 5%. House Republicans at the time wouldn't allow it up for a vote. 

Hall said this month that he promised Senate leader Phil Berger support for the 3.5% cap amendment in exchange for other considerations in ongoing state budget negotiations, such as higher state employee raises that the House had pushed for.

Critics say the move could leave North Carolina unable to respond adequately in the future to natural disasters, economic recessions or other emergencies. North Carolina is legally required to have a balanced budget, with no deficit spending, so any drop in revenue must be made up by either making cuts or raising revenue, such as through taxes.

Democrats called the proposal a move to trick voters this November into thinking the amendment will lower their taxes immediately. It won't, since lawmakers already plan to lower the income tax rate to 3.49% next year regardless of whether the amendment passes with its proposed 3.5% cap.

Closing affordable housing tax loophole

The House voted unanimously to pass another bill---a proposal for a new law, not a constitutional amendment---that would reduce housing developers' eligibility for a property tax break. Right now, due to a recent state court ruling in what's called the Blue Ridge case, many developers can qualify for the tax breaks by promising a limited number of their development's apartments, townhomes or other units as affordable housing. Critics say the court ruling was too expansive and needs to be tightened up, which is what House Bill 1042 proposes.

 Rep. Erin Pare, R-Wake, is its main sponsor. She said if her proposal had been in place last year, Wake County alone would've collected an additional $11.4 million in revenue.

Her estimate indicates that many apartment complexes and other property owners would no longer qualify for the tax breaks, if the proposal becomes law. WRAL previously reported that the tax breaks cost Wake County $12.3 million in 2025, by taking nearly $750 million worth of property off the rolls.

Raleigh Mayor Janet Cowell has also been among those calling for a change to the law. "You can see a real train coming down the railroad at you,” Cowell told WRAL earlier this year. “We’ll either have to raise taxes on homeowners to make up for that or not hire those police or not build those fire stations and figure out where we cut.”

The bill now goes to the state Senate for that chamber to consider. The Senate could pass it as-is, suggest changes or refuse to take it up altogether.